U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10SB12G/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of
The Securities Exchange Act of 1934
EDUMEDIA SOFTWARE SOLUTIONS CORP. formerly ICON ACQUISITION CORP.
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(Name of Small Business Issuer)
New York 58-2588408
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(State of Incorporation) (IRS Employer ID NO.)
110 Roosevelt Boulevard, Suite 101, Marmora, NJ, 08223
(Address of Principal Executive Offices)
Issuer's Telephone Number 412-621-0902
Securities and Exchange Commission File Number ______________
Securities to be Registered under Section 12 (b) of the Act: NONE
Securities to be Registered under Section 12 (g) of the Act:
Title of each Class Name of each
to be so Registered: Exchange on which
each Class is to be
Registered:
COMMON STOCK
$.001 PAR VALUE NOT APPLICABLE
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Part I 3
Item 1. Description of Business 3
Item 2. Management's Discussion and Analysis or Plan of Operation 15
Item 3. Description of Property 19
Item 4. Security Ownership of Management 19
Item 5. Directors, Executives, Officers and Significant Employees 20
Item 6. Executive Compensation 21
Item 7. Certain Relationships and Related Transactions 21
Item 8. Description of Securities 24
Part II 25
Item 1. Market for Common Equity and Related Stockholder Matters 25
Item 2. Legal Proceedings 26
Item 3. Changes in or Disagreements with Accountants 28
Item 4. Recent Sales of Unregistered Securities 28
Item 5. Indemnification of Directors and Officers 28
Part F/S __
Item 1. Financial Statements __
Part III __
Item 1. Index to Exhibits __
Item 2. Description of Exhibits __
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PART I
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Item 1: Description of Business
A. Overview
Edumedia Software Solutions Corporation, formerly known as Icon Acquisition
Corp. ("Edumedia" or the "Company"), is a full service computer hardware and
software technology supplier. Edumedia has been in the business of providing
technology solutions to K-12 educational institutions, real estate and legal
firms, and other business clients in the New Jersey, New York, and Pennsylvania
regions since its incorporation as Edumedia, Inc. (a New Jersey corporation) in
1995.
Historically, we have focused on the sale of computer hardware and standard
software packages to our various clients. Considering the declining margins on
computer hardware, we are shifting our sales focus to software, technology
solutions, and Internet and Intranet networking. Seeking to build upon our
established relationships with several educational industry clients, we are
planning the development and sale of a new educational software product: a
Web-based Digital Portfolio and Assessment Tool.
B. Corporate History
Edumedia Software Solutions Corporation ("Edumedia" or the "Company") was
incorporated as Icon Acquisition Corp. ("Icon") in the state of New York on
November 28, 19941, and engaged in the business of mining tungsten and other
precious metals in Canada, until October 10, 2000 when it acquired Edumedia,
Inc., a New Jersey corporation, in a merger transaction. The Company filed a
Form D with the SEC in October 1996, utilizing an exemption from registration
under Rule 504 of Regulation D of the 1933 Securities Act, in order to
distribute 8,573,337 shares of common stock to 1081 shareholders as a dividend
distribution to the stockholders of SLP Technology Corp., with such transaction
deemed as a recapitalization pursuant to the express provisions of Rule
144(d)(3)(viii) and SEC Release Number 6862.
Icon voted to enter into a stock-for-stock exchange between Icon and the
shareholders of Edumedia, Inc. on April 26, 2000, whereby Icon acquired 100% of
the shares in Edumedia in return for twelve million four hundred thousand four
hundred (12,400,000) restricted shares of Icon.2. Edumedia then effectively
became a subsidiary of Icon, and subsequently merged into the Company in the
state of New York on October 10, 2000, which became effective in New York upon
filing3. The Company then elected the Officers and Directors of Edumedia, Inc.
as its Officers and Directors, who then elected to change the name of the
Company from Icon Acquisition Corp. to Edumedia Software Solutions Corporation.
As such, we now perform all operations and sell all products and services as
Edumedia Software Solutions Corporation. As a result of the Merger and
subsequent transactions, the Company's current capitalization consists of
100,000,000 authorized shares, of which 13,713,509 are issued and outstanding.
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Edumedia, Inc. was incorporated in New Jersey on October 12, 1995. In 1998,
Edumedia, Inc. acquired certain assets of GB Consulting, a computer company
located in Millville, NJ for a total consideration of US$200,000. The assets
listed in the agreement which the Company acquired included customer list with
over 1000 accounts (40 School Districts), the active New Jersey State contract
for mini/micro computer equipment as an approved vendor, and the inventory and
the fixed assets at location 129 North High Street, excluding accounts
receivable, short and long term liabilities which originated before August 1998,
and bank accounts. Intangibles included Good Will and a covenant not to
compete.4
We are filing this Form 10-SB voluntarily with the intention of establishing
fully reporting status with the SEC. The fully reporting status with the SEC is
a necessary step in accomplishing our goal of establishing a market for our
equity securities sometime in the future. Consequently, the Company will
continue to voluntarily file all necessary reports and forms as required by
existing legislation and the SEC rules.
C. General Products and Services
Edumedia provides computer related products and services to a variety of
clients, most prominently K-12 educational institutions, in New Jersey and New
York, and is striving to expand the geographic market for its products and
services to Pennsylvania and Delaware. Our primary target clients include
educational institutions, federal and state government contracts,
retailers/wholesalers and distributors, law offices, and real estate offices.
Our business strategy for the future concentrates on a gradual transition to
higher profit margin products and services, namely: educational software
solutions, Internet/Intranet network infrastructure, IT services, and hardware,
software, and video teleconferencing solutions.
The products and services provided to educational institutions include
technology planning, assessment of New Jersey state mandated core curriculum
applications, educational multimedia software, Federal, State and Foundation
grant research and writing services, administrative and classroom management
software, computer and networking hardware, distance learning infrastructure,
and computer repairs/upgrades.
For State and Government contract procurement, the Company is on the New Jersey
Bidder's list. For Federal Government contracts, the Company teams up with eight
(8) "A Certified Small Businesses" to provide technology service and product
support. For local retail/wholesale distribution clients, we provide technology
planning services, accounting, scheduling and word-processing software, training
and support services, computer and networking hardware, computer repairs and
upgrades, and Internet/Intranet solutions.
We provide law offices with productivity assessment, accounts receivable
management software, Internet legal research tools, accounting and word
processing software, computer and networking hardware, computer repairs and
upgrades, and Internet/Intranet services.
We also provide real estate offices with technology planning services, accounts
receivable management and accounting software, contact and property management
tools, high-end graphics for multimedia presentations, scheduling and word
processing software, training and support programs, communications consulting,
Internet/Intranet services, computer networking hardware, and computer repairs
and upgrades.
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D. New Web-based Multimedia Individualized Student Task Management and
Performance Assessment Tool
The Product
The Company is seeking to develop a multimedia individualized student
task management and performance assessment tool that would allow
students to create a digital portfolio of their entire academic career.
This product will be Web-based, and as such will allow easy access to
students. It would allow teachers to create in-depth Performance Tasks
that can incorporate state standards, district or course goals, and
guidelines for evaluation of the students' work. Students will be able
to complete these various tasks utilizing a variety of multimedia
tools, while receiving ongoing teacher review and feedback. The system
would enable students to save their best work on CD, or a personal WWW
page, thus creating multimedia portfolios that can detail their skills
and progress throughout their K-12 education. The Company plans to
co-develop this product with the assistance of a software development
and programming company that has not yet been selected.
Development and Marketing
The Company has identified strategic partners to pilot the final
development of this product, prior and during the commercial release.
Pilot partners to date for the product development include the Miller
School in Northeastern Pennsylvania, and the Camden County Educational
Technology Training Center (ETTC) in Southeastern New Jersey. The
Company is seeking a pilot partnership with an existing Charter School
in Southeastern Pennsylvania, as these schools are by definition
innovative and progressive in their methods of education. We plan to
have additional pilot partners identified by December 2000. We are also
seeking endorsement by a teaching University to partner in a pilot
program as well.
Edumedia has contacted other ETTC's in New Jersey, and has plans to
offer seminars to them after product launch. Edumedia will include
Ohio, New York and Delaware with similar marketing arrangements, where
key market zones are identified and where Edumedia will have the
personnel to exclusively service this area.
Software Requirements, Functionality and Computing Platform
The first task of the development team is a clear understanding of the
software requirements, application functionality, and scope of the
project as defined by Company management and application content team.
The application content team has defined the software and content
requirements, which, along with the technical team's project motto of
"simplicity, flexibility, and robustness," will be our guiding
principles during software application development.
A very important technical consideration is the average computing skill
and computing platform available to the targeted end users: students,
teachers, and administrators of public and non-public K-12 and Higher
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Education learning institutions. Typically, the technical expertise and
availability of technical staff at the K-12 level is minimal. To be
received well by end users, the application must be simple to install
and deploy across the network, and require minimal support from the end
user's technical staff.
Macintosh and Windows based operating systems comprise the majority of
public, private, and higher education computing platforms. Linux is
also becoming a viable operating system for education institutions due
to its growing acceptance in the business community and its reduced
cost of ownership. K-12 education institutions typically have a local
area network or intra-net in place, or are working towards that goal in
the near future. This software tool must accommodate the end users
environments described above.
E. The Educational Market
Edumedia's primary market for its products and services has been and will
continue to be the educational market. The education industry in America is
comprised of 53 million students, 3.1 million teachers, and 15,000 school
districts including 1100 charter schools nationwide. This large base of
students, teachers, and administrators are targeted users of the proposed
application. Private investment in education related technology has been growing
at an annual rate of 113% from 1993 through 1999 (See Inc. Magazine, July 2000
edition and www.eduventures.com). According to industry expert and
eduventures.com analyst, Tom Evans it is likely that revenues in the sector will
see as much as 100% to 200% growth in 2000. Through the Federal e-rate program
(under the Telecommunications Act 1996) over $2.2 billion dollars per year are
spent on building infrastructure in America's schools, while the next stage of
development is to include the associated software solutions and staff training.
This is critical since nearly 60% of today's teachers privately admit to lacking
basic computer skills. The states are spending at a high rate as well such that
in New Jersey alone a recently enacted law will bring $12 billion dollars in
education funding through the year 2002.
Most of the State Departments of Education have mandated specific core
curriculum content standards and required reporting mechanisms that show
evidence of technology applications in education. School Districts' funding
sources from the state and federal level are becoming more and more restricted
to compliance with the core standards, and performance based on reported
assessment results. A new paradigm in education is evolving such that the focus
is increasingly on actual student learning rather than the subject matter taught
to them, with educators being held accountable. Many states have identified and
mandated specific core curriculum content standards and the student must
demonstrate achievement according to them in all subject areas. A major issue,
therefore, is just how student achievement can be more effectively measured.
Test scores alone are not the best way to assess student performance and
intellectual growth. Although standardized tests are needed to make comparisons
on a national or regional level, "authentic assessment" records the "real world"
capabilities of students and teachers alike, and provides a rich chronicle of
relevant development. Some states, such as Vermont and Kentucky, already require
portfolios in addition to report cards and transcripts.
More specifically for illustration, with the adoption of Chapter 4: Academic
Standards and Assessment in Pennsylvania, schools will need technological tools
that help to meet state standards, and to demonstrate that they are met.
Software solutions such as the new digital portfolio tool of the Company will
have to meet certain specific requirements by providing Curriculum Alignment,
Performance Task Development, Authentic Assessment, Curriculum Integration, Oral
Presentations on digital media, and Prescriptive Reporting capabilities. Indeed,
the standards demand the infusion of technology into the whole curriculum. The
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Governor's Advisory Commission on Academic Standards stated: "Through a system
of academic standards and tests or assessments keyed to those standards, it will
be possible to determine the progress schools make from year to year."
'Performance Funds', and other incentive rewards, will be given to schools that
can show significant improvement in student achievement and effort based upon
these standards. Consequently, schools will be looking for solutions that both
infuse technology into the curriculum, and offer the type of curricular
reinforcement, assessment, and demonstration of academic standards being sought.
A survey by the Pennsylvania Dept. of Education (PDE) in 1995 showed that 88% of
the respondents are investigating or implementing portfolio assessment programs
in their districts. With the Company's technical expertise in educational
technology it can emerge as a leading solution provider to these schools,
providing a level of support which includes not only the sale of software and
hardware, but continued training and technical support.
The Company's new Web-based digital portfolio and assessment tool will
incorporate all required features. The Company understands the need for an
effective program to document student achievement that utilizes the most current
technology today while meeting state mandated standards.
F. Marketing and Product Recognition Strategy
Pilot Programs
The pilot programs for the new Web-based software product are expected to begin
during 1st Quarter of 2001, and will provide relevant product information that
is critical to a subsequent successful market launch, expected in 2nd Quarter,
2001. Our experience indicates that the training components are the key to
successful market acceptance of a new technical product. Through the Company's
pilot partners, the software program will establish its reputation with other
neighboring districts and technology administrators for referral sales. Edumedia
will emphasize the training component to various district clients within its
target market of Pennsylvania, New Jersey, and Ohio. With commercial product
launch expected in April 2001, software related sales for the first year (fiscal
year July 2001-June 2002) are projected to be upwards of USD $2 Million.
We estimate that once the Mid-Atlantic States market is penetrated, within a
short time the model can be duplicated and expanded on a national level. When
accepted as a desirable and proven product, it may attract suitors and strategic
partners who will be interested in expanding the product's market exposure. The
final product is expected to be successful and in high demand because it will
provide:
1) A user friendly design;
2) A solution to state mandates attractive for administrators;
3) A solution for teachers who need an efficient tool for weekly lesson
planning which aligns to curriculum standards;
4) A multi-faceted tool for assessment of achievement to governmental
officials, employers, and educational institutions;
5) An easy to navigate tool for parents to access their children's
performance and achievement records from home;
6) The ability for students to understand grading guidelines through
self-assessment and the use of rubrics to reflect and build on past
accomplishments; and
7) The ability for teachers to create digital portfolio and
self-assessment through rubrics with standards established by the
School District or University.
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Value Added Re-sellers
Integrated Learning Systems (ILS) have indicated that digital portfolio and
authentic assessment are desired features for their target markets, but have not
offered a well-rounded digital portfolio solution. ILS's are large well-funded
companies with substantial market exposure, and may as such consider this
software application to be a desirable add-on component. Once this application
has earned a solid reputation as a valuable learning tool, it is anticipated
that various marketing agents, ILS's, and distributors will seek to resell our
products.
Pricing Strategy
The software pricing shall initially be designed to gain immediate market share,
and to pre-empt competition in the geographic market. Preliminary pricing is
competitively positioned with other educational applications, and is structured
on a per user license basis of $49.95 for each retail sale. Competing programs
of some of the larger ILS's, for example, charge $49.95 for their base software
and offer additional options that are add-ons at approximately $29.95 per
additional feature. Retail licenses may be discounted for volume purchases in
multiples of five ($225 each 5 pack) with one installation CD and one
documentation CD to be provided for every ten users. For purchases of 100 or
greater licenses, the price is intended to be $2,500 for a 100 pack. For
purchases of 1,000 or greater licenses, the projected retail price is $20,000.
Distributor pricing will be structured at a 35-50% discount for the top tier
large volume distributors, 25-35% for regional authorized re-sellers, and
special considerations will be offered to select value added re-sellers. By
meeting the competition pricing, the Company believes that it will encourage
potential customers to compare and choose our software over competing
applications.
G. Distribution Model
Direct Sales
Within our geographical market (New Jersey, New York, Pennsylvania, and
Delaware), the Company has and will continue to concentrate direct sales efforts
on maintaining close relationships with key individuals. We have become
recognized for our professional responsiveness. A substantial portion (81%) of
our annual income is due to repeat business with pre-existing clients, which
reflects the level of current customer satisfaction.
The initial goal of our marketing approach is to build product awareness and
introduce the new product to key decision-makers that hold influence in the
marketplace. Typically, the decision-making process for the district's
purchasing is initiated through contacts with the Curriculum Supervisor and/or
Technology Coordinator of the school district. Also critical to the process is
recognition and endorsement by the school board.
National Wholesaler
Edumedia is considering the Academic Distributing, Inc.
(www.academic-wholesale.com) as a national sales and distribution outlet. The
cost of utilizing this wholesaler's services is $10,000 per year in addition to
discounted volume purchasing benefits (50% off list), and is considered
reasonable and cost-effective. The national wholesaler will supplement the
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marketing/distributing model that we plan to have in place by providing the
ability to penetrate other markets beyond the Mid-Atlantic states without any
increases in overhead costs, advertising, or staff. Academic Distributing
supplies computer related products through its re-sellers located throughout the
United States. Existing Edumedia authorized distributors have a productive
relationship with Academic Distributing, and they have provided the re-sellers
with product support, order fulfillment, billing and collections, and prompt
distribution. Edumedia is in the final stages of contracting with this firm,
which should be completed prior to product testing during early 2001.
The national marketing distributor is expected to contribute approximately 15%
of total software sales. All national sales outside the immediate geographical
market will be filled and distributed from the wholesale distribution firm.
Other services they provide will include:
o Marketing in their catalogs;
o Sales support and training though their re-seller channel; o Conducting
informational seminars; and o Trade Show participation.
Strategic Authorized Distributors
The company is establishing contractual relationships with three educational
software re-sellers who will provide prominent roles in the development and
training aspects of the product launch. These distributors have helped to
develop program sales and implementation policies and procedures based on their
experience. These strategic partners will be direct participants in pilot
program development. These strategic partners will be able to purchase the
software at wholesale discount of 25 to 50%.
Independent Sales Representatives
The Company is seeking to establish a network of independent sales reps that
will be authorized to sell and distribute the software in their specified
geographic regions. Such independent agents typically carry other complimentary
product lines of non-competing manufacturers and will help to expand sales
through their client base. The agents will provide the necessary staff
development and training support to their clients, which will be directed by
rigid training guidelines. To implement this, all newly authorized agents will
be required to undergo in-house training. All representatives will receive
compensation in discounted sales of approximately 25% to 30% off manufacturers
list price.
In-house Marketing and Support
In addition to the National Distributor, Authorized Resellers, and Independent
Representatives, the Company will hire, train, and compensate a full time direct
marketing that will sell only our products and services. The initial in-house
marketing plan details direct mail, mass fax, and mass e-mailing activity to
strategic targeted accounts including existing accounts to introduce the new
software product. Direct sales calls will include appointments with key contacts
within the school districts.
H. Competition
The market for computer products and services is very competitive. Edumedia
competes primarily with local and regional technology providers, as well as with
several national companies. The Company has obtained a competitive edge in the
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industry by focusing not only on hardware, but also by broadening its scope to
include software and the networking aspects of technology implementation. This
distinguishes us from limited vendors, who only provide either hardware or
software and are thereby restricted to that extent.
From the beginning of a project to the end, our services are all encompassing.
We commence our client relationships with a professional, in-depth assessment of
what is currently in place in the client's system. Many of our competitors
engage in generic bid specifications for client requests, which is likely to
result in incompatible software and hardware. This commonly leads to finger
pointing between hardware and software vendors, which is counterproductive. By
becoming a full-service technology provider, we can effectively produce the
results our clients want without unnecessary interference.
The list below consists of local competitors in our present geographic market in
New Jersey, New York, and Pennsylvania that have resources available to offer or
refer computer repair, on-site service, training, support, classroom training,
software and hardware.
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National Competitors Regional Competitors
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IBM Computer House
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Josten's Computer Corner Contemporary Computer Resources
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Skills Bank Computer Corner
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NovaNet Mossmans Business Machines
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Power School Compulan
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Flying Rhinoceros Atlantic Micro Systems
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Learning Pays.com Atlantic Business Machines
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LightSpan Kehtron
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TalkStream PC Network Services
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Computer Curriculum Corporation Martek
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Schoolhouse Computers
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Technical Business Systems
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Future Tech
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Software Scene
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Software City
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Business Computer Resources
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Hi Tech Systems
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Technology 21
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Direct Competitors
With respect to our digital portfolio software under development, there are five
identified competing products on the market, including Edmin; Superscool; Grady
Profile, and the SASI Curriculum Management Group. However, easy access via the
Internet, the comparative user-friendliness, a strong staff training philosophy
for successful implementation, rubrics for assessment at the student, teacher,
and district level, curriculum alignment in lesson planning demonstrating
compliance with state mandated core curriculum content standards, and across the
curriculum application among multiple subject areas will set the Company and its
new software application apart from others.
It is too early to identify competing software programs that are similar to
Edumedia's proposed program, and assess their market performance. Although many
products have been R & D stages for several years, the national trend in
educational techniques is just now maturing to permit commercial acceptance into
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the market. Until recently these concepts were thought to be strictly academic
and theoretical. Edmin, a California based competitor that has previously
offered task specific products, has reported meteoritic growth with the
introduction of a new software featuring assessment tools similar to Edumedia's
Web-based product which is currently under development. Despite the fact that
Edmin has clearly established itself as a market leader in a short period of
time by becoming the first to market such a product, and by creating a strategic
alliance with a marketing powerhouse such as Compaq, its software lacks emphasis
on four program features which, in our assessment, are critical:
o Ease of use
o Strong staff training philosophy for successful implementation o Rubrics for
assessment at the student, teacher, and district level o Curriculum alignment in
lesson planning which demonstrates compliance
with state mandated core curriculum content standards, and across the
curriculum application among multiple subject areas.
Furthermore, due to the immensity and diversity of the market Edmin's early
success does not preclude Edumedia and other market entrants from achieving
substantial market penetration. Another advantage that Edumedia has over
identified competitors is its strong local presence, affiliations, and existing
customer base. The Company has the ability to develop a network of local
providers with accessible, available, and skillful technical support staff.
According to the Company's marketing and distribution model described above each
direct and authorized re-seller will emphasize essential staff development and
training for the teachers and administrators. The training to implement these
software programs has been neglected by competitors who seem to have ignored the
fact that 60% of teachers lack basic computer skills.
There is a number other companies not listed as direct competitors below which
have used the term 'digital portfolio' with respect to certain software
products, none of which addresses more than one of the features identified in a
well focused digital portfolio solution as defined by state departments of
education. An assumption should also be made that there are a number of
potential direct competitors, however, the majority of these companies currently
lack the financial resources necessary to achieve national recognition in the
educational software market.
The following is the current list of identified competitors to date:
1. Edmin.com
2. SuperSchool
3. Aurbach & Associates Grady Profile
4. The SASI Curriculum Management Group
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Indirect Competitors
Indirect competitors in the marketplace include the following:
1. Integrated Learning Systems (ILS's), such as Computer Curriculum Corp.,
which are large software programming companies. Edumedia will have the
opportunity to contract with these companies in order to provide
digital profile/assessment software as a companion to their product
spectrum;
2. Fully integrated computer companies, such as Compaq and IBM, which
offer the entire spectrum of technology in the education arena but do
not specifically supply 'Digital Portfolio Assessment Tools'; and
3. Upstart web portals, such as Lightspan and BigChalk who carry bundled
software resources on their sites, but do not currently offer any
digital portfolio assessment tools.
1. Integrated Learning Systems (ILS) companies
-------------------------------------------
These companies offer instructional courseware focusing on the various specific
curriculum areas which are standardized in the K-12 education market. ILS's have
curriculum management tools already in place as their primary purpose is to
monitor student strengths and weaknesses through curriculum exercises in all
skills outlined in standard curriculum and tests, and then suggest additional
exercises as a remedy to strengthen their weaknesses. This process is referred
to as prescriptive reporting. This curriculum management feature is very similar
to the prescriptive reporting feature of the software which Edumedia is
currently developing.
Despite the apparent similarities with ILS products, there are unique remedial
features in Edumedia's software. The limiting factors to the implementation and
utilization of ILS products are that they are highly interactive and cumbersome
for the novice user. They currently have neglected to implement multimedia
digital portfolios although they recognize the need.
Major ILSs include:
o Computer Curriculum Corp.
(http://www.cccnet.com,http://www.ccclearn.com/)
o JostensComputer Corner (http://www.jostenslearning.com)
o TRO/Plato (http://metalab.unc.edu/cmc/mag/1994/jul/plato.html)
o SkillsBank
(http://www.learningcompanyschool.com/solutions/products/sb4over.htm)
2. Fully integrated computer hardware and software companies
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These include Compaq, IBM, and Apple who offer the entire spectrum of technology
in the education arena, but not specifically offering any digital portfolio
assessment tools. We have authorization to resell the product lines available
from these companies.
3. Upstart Web Portals
-------------------
These feature bundled software resources on their sites, covering all technology
areas including lesson planning, attendance record keeping, curriculum alignment
and management, subscriptions to on-line curriculum companies, and distance
learning tools. However, they are not specifically offering any digital
portfolio assessment tools at this time. These include:
o Learning Pays.Com (www.learningpays.com)
o Lightspan (www.lightspan.com)
o Task Stream (www.taskstream.com)
o Novanet
o Big Chalk
o PowerSchool (www.powerschool.com)
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The features of Edumedia's new Web-based digital portfolio software are unique,
and the market for this brand of technology is rapidly evolving. Through public
trade shows, interviews with key individuals, and company research, we have
identified a large demand for our product's characteristics. The depth and
nature of the market dictates that others will soon be offering a competing or
similar software product. This represents both an opportunity and a risk for the
Company as a rapid commercial offering with sufficient marketing resources is
essential to ensure an immediate and substantial market share. Once brand
identity is established within the Mid Atlantic states' market, other dominant
software/ hardware companies may wish to enter this niche to develop their own
competing product, or to purchase our product outright.
I. Intellectual Property
The Company has rights on the name "Edumedia" as a registered service mark until
2007. There is no other intellectual property owned by the Company at present
time. We will seek intellectual property rights and protection for our Web-based
Digital Portfolio and Assessment software product once the product passes the
final stages of planning, and we select and enter into a co-development
arrangement with a programming and software consulting company to develop the
new software product.
J. Principal Suppliers
Edumedia, being a full service computer hardware, software, and service value
added retailer, necessarily maintains relationships with a large number and wide
variety of product suppliers. Since 1995 the Company has secured business
partnerships with several major hardware and software providers. As a result, we
are a Symantec Authorized Developer, Hewlett Packard Authorized Reseller, IBM
Business Partner, Dell Authorized Dealer, Compaq Authorized Reseller, 3COM
Authorized Reseller, Microsoft Solution Provider, and Adobe Authorized Reseller.
In addition, we serve as an Authorized Microsoft Testing Center, and an A+
Certified Service Center. Additionally, our inventory includes products from
several other leading manufacturers of the computer hardware and software
industry, including American Power Conversion, Corel, Epson America, Intel,
Iomega, Kingston Technology, Lexmark, NEC Technologies, Novell, Okidata,
Seagate, Sony, Toshiba, ViewSonic, and Western Digital.
K. Major Customers
We have built solid business relationships with our clients evidenced by repeat
business with over 60 law offices, 40 school districts, and more than 20
government accounts.
For our clients in the practice of law we provide hardware and industry specific
software, including Time Slips, Q & A, Symantec, and Microsoft, and peripheral
equipment, installation, training, and technical support. Our legal clients
include the following:
o Robert Fleming, Esq., Goetz, Fleming & Spiegle, Ocean City, NJ
o Judge Gilbert O. Gilbertson, Esq. , Marmora, NJ
o Judge Richard Russell, Ocean City, NJ
o Jo Anne Leigh Gramm, Esq., Linwood, NJ
o Alan I. Gould, P.C., Wildwood, NJ
o Judge Louis Belasco, Way and Belasco Law Offices, Wildwood, NJ
o Rio Grande Attorneys, Inc., Rio Grande, NJ
13
<PAGE>
For our government agency clients we provide hardware and software, peripheral
equipment, installation, training, and technical support.
The majority of our business is with schools and school districts. While we
cater to a myriad of businesses and industries, we specialize in the development
of educational software. Our major school district customers include:
o Wildwood Board of Education
o Atlantic County Special School District
o Upper Township Board of Education
o Middle Township Board of Education
o Cape May County ETTC
o Wildwood Board of Education, Wildwood, NJ
o Hamilton Board of Education, Mays Landing, NJ
o Atlantic County Special Sch. Dist., Corbin City, NJ
o Donald J. Adams School, Northfield, NJ
o Atlantic County Special Sch. Dist., Winchell School, Mays Landing, NJ
o West Cape May Elementary Lab, West Cape May, NJ
o Local and regional business customers include:
o MarketPlace Realty, Margate, NJ
o Executive Cash Services Inc., Hammonton, NJ
o Robert Brooks Assoc., Margate City, NJ
o Salfi Plumbing & Heating, Avalon, NJ 08202
o Dosko East Inc., Sea Isle City, NJ 08243
L. Personnel
The Company currently has 12 full-time employees including John P. Daglis
(President and CEO). Grady Faircloth (Consulting Account Manager). Joseph Gorgo
(Senior Account Manager), Robert Iaconis (Service Manager). In addition,
Edumedia employs 5 IT technicians and 3 sales and administrative support
personnel.
Item 2: Management's Discussion and Analysis or Plan of Operation
The following discussion of the results of operations and financial condition
should be read in conjunction with the financial statements and notes thereto
attached as Exhibits to this Form 10-SB, reflecting operations and financial
condition both before and after the acquisition of Edumedia, Inc.
As set forth in Item 1 above, prior to October 10, 2000, the Company was a
development stage company, and as such had no operations. Therefore, all
discussions below concerning the performance of the Company prior to the merger
with Edumedia, Inc. relate to and reflect the operations of Edumedia, Inc. only.
14
<PAGE>
Special Note - Forward-Looking Statements
Certain statements contained in this Form 10-SB, including, without limitation,
statements containing the words "believes," "anticipates," "expects" and words
of similar import, constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995.5 Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements of the Company, or
industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements.
Such factors include, among others, the following: international, national and
local general economic and market conditions: demographic changes; the size and
growth of the plastic packaging markets for both consumer and industrial uses;
the ability of the Company to sustain, manage or forecast its growth; the
ability of the Company to successfully make and integrate acquisitions; raw
material costs and availability; new product development and introduction;
existing government regulations and changes in, or the failure to comply with,
government regulations; adverse publicity; competition; the loss of significant
customers or suppliers; fluctuations and difficulty in forecasting operating
results; changes in business strategy or development plans; business
disruptions; the ability to attract and retain qualified personnel; the ability
to protect technology; and other factors referenced in this Form 10-SB. Certain
of these factors are discussed in more detail elsewhere in this Form 10-SB.
Given these uncertainties, readers of this Form 10-SB and investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
Results of Operations
Over the past eight years, our revenues have increased steadily at rates between
20% and 70% annually. On December 31, 1998 we had accumulated total assets worth
USD $1,210,442.95, of which $14,417.72 were fixed assets, while accounts
receivable worth $673,929.86 and an inventory of $253,528.36 represented a bulk
of the total then-current assets valued at $972,952.99. Accounting for total
liabilities of $1,046,029.93, equity was worth $164,413.02. In the year 1998,
the Company generated total revenues of $2,125,101.49. Operating expenses
amounted in all to $2,035,594.47 resulting in a net income of $89,507.02 for the
year ending December 31, 1998.
By December 31, 1999 our total assets had increased to $2,874,780.62: then
current assets stood at $1,950,585.49 with accounts receivable representing
$918,556.95 of these. Fixed assets increased in value to $46,967.02. Accounting
for total liabilities of $2,531,334.54, equity was worth $343,446.08. In the
year 1999, the Company generated total revenues of $2,967,670.42, representing
an increase of 39.65% from 1998. However, due to long payment times exceeding
120 days, deferred revenues totaling $554,546.00 from federal grants were not
included in the sales figures for 1999. Operating expenses amounted in all to
$3,892,634.27 resulting in a net loss of $924,963.85 for the year ending
December 31, 1999.
15
<PAGE>
Financial statements for the first three Quarters of the year 2000 show that as
of June 30, 2000 our total assets stood at $1,745,304.06: then-current assets
were worth $1,424,788.32 with accounts receivable representing $983,980.48 of
these. Accounting for total liabilities of $1,425,959.37, equity was worth
$319,344.69. In the first nine months of 2000 the Company generated total
revenues of $1,234,749.62. Operating expenses amounted in all to $660,495.01
resulting in a net profit of $574,254.61.
Liquidity and Capital Resources
Historically, the Company's working capital needs have been satisfied through
obtaining interest bearing loans equity investment from various investors. The
Company commenced an offering of its securities in July of 1999, which the
Company believes is exempt from registration under Section 4(2) of the 1933
Securities Act, whereby the Company has thus far sold 5,063,094 shares of its
common stock in return for US$2,006,424 to a total of 63 investors. For a
complete description of the private offering see the section on Recent Sales of
Unregistered Securities infra.
As clearly indicated by the figures cited in the above section, despite
increasing revenue figures on an annual basis, the Company has endured cash flow
constraints. This has largely been due to the fact that to date the Company has
relied on interest bearing loans to finance its operations and growth as opposed
to equity infusion. Furthermore, a majority of the Company's clients are
educational institutions (schools) and state-run educational agencies: such
accounts receivable take much more time due to the bureaucratic process
involved. Considering further the capital-intensive nature of a hardware
inventory necessary for successful operations, the Company has had significant
cash flow problems. This has resulted in a situation wherein despite increasing
sales and revenue generation the Company has lacked the ability to pay bills and
satisfy creditors. This has resulted in certain legal proceedings against the
Company by dissatisfied creditors. See Item 2 of Part II of this Form 10-SB on
Legal Proceedings.
The Company anticipates meeting its working capital needs during year 2002 and
thereafter primarily with revenues from operations. Until that time, Management
anticipates the need for approximately US$2,500,000-$3,500,000 in additional
capital to continue its marketing and sales growth, for distribution of its
educational software and hardware products, and to cover costs of meeting its
reporting obligations under the Exchange Act, including legal and accounting
expenses. The Company will seek to borrow these funds and/or raise such funds
through either the public or private sale of its common stock. No assurances can
be given that such financing will be available, or that it can be obtained on
terms satisfactory to the Company, if at all. If the Company is unable to secure
financing from the sale of its securities or from private lenders, Management
believes that the Company will find it hard to continue operating until revenues
from current operations increase over time during the year 2001.
Management feels that while $1 million is the minimal amount of funds needed to
drive substantial revenue growth during 2001 without engaging in proprietary
product development, the optimal amount needed, based on Management's analysis,
is approximately $4 million within the first 6 months of year 2001, and an
additional $3,000,000 to $6,000,000 during the rest of year 2001, which would be
used to substantially expand the Digital Portfolio and Assessment software
16
<PAGE>
product's presence in US and international markets. A better understanding of
the Company's future investment goals and strategy can be gleaned from the
following projected use of proceeds from any future equity offering:
EXPENDITURE AMOUNT PERCENTAGE
-------------------------------------------------------
R & D Expense $ 1,500,000 39.1%
Working Capital $ 750,000 19.5%
Sales (SADA) $ 450,000 11.7%
Professional Fees $ 100,000 2.6%
Short Term Liabilities $ 850,000 22.1%
Long Term Liabilities $ 13,000 0.3%
Tax Liabilities $ 175,000 4.6%
-------------------------------------------------------
TOTAL $ 3,838,000 100%
It must be stressed however, that the amounts set forth above are only
estimates, and the Company is unable to predict precisely what amount will be
used for any particular purpose. Nonetheless, this suggested use of proceeds
indicates a focus on the effective sales and marketing of educational software
as well as an expansion of manpower and the continued development of technology.
Plan of Operation
The Company sells a variety of computer related products, including hardware,
networking infrastructure, educational software, IT solutions and support
services. With prices and margins on computer hardware declining rapidly,
Edumedia will focus more of its efforts in the future on developing and selling
higher margin software and web-based products. To that end, the Company has, and
will expend significant amounts of money, up to $1,500,000, during 2001 in order
to develop a proprietary digital portfolio manager.
Based on key assumptions, projected financing of $4,000,000, and market trends
and analysis, the Company has completed the following financial projections for
the years 2001 through 2003:
17
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================
Edumedia 3 year projections
REVENUE STATEMENTS
YEAR 2001 2002 2003
REVENUES
<S> <C> <C> <C>
Hardware (Includes Ntwrk Infrstructur) 9,100,000 11,850,000 14,220,000
Software (commercial, Acct, e-comrce) 136,000 182,000 218,400
Technical/Network Svcs 783,000 1,566,000 1,879,200
Training & Support 256,000 424,000 1,280,000
Subcontracted Training & Support 18,100 106,000 320,000
Educational Software (Proprietary) 1,040,000 2,650,000 8,000,000
---------- ---------- ---------
Total Revenues 11,333,100 16,778,000 25,917,600
COGS
Hardware (Includes Ntwrk Infrstructur) 8,607,500 9,480,000 11,376,000
Software (commercial, Acct, e-comrce) 128,450 145,600 174,720
Technical/Network Svcs 640,880 1,337,600 1,759,360
Educational Software Outsourced 252,000 175,000 200,000
PRODUCT DEVELOPMENT
Training & Support 11,000 25,000 27,000
Subcontracted Training & Support 6,200 84,800 84,800
Product Development 29,326 20,000 20,000
Production Costs 9,250 26,500 80,000
Consulting Costs 60,000 30,000 70,000
Product Marketing Costs 57,200 185,500 560,000
Graphics Integration 24,000 0 10,000
Outsourced Development Costs 166,376 25,000 50,000
Project Director 70,000 50,000 50,000
Software Project Management 59,900 62,000 64,000
Product Distribution (Wholesale) 20,800 41,600 41,600
SELLING EXPENSE
Selling Expense (Commmissions after draw) 272,717 335,560 518,352
-------- -------- -------
Total COGs, Product Dev. & Selling Exp. 10,313,309 12,024,160 15,085,832
Expenses
Travel Expense 25,800 56,600 145,150
Office Equipment 13,100 17,541 33,084
Interest Expense 276,345 354,665 404,752
Insurance 38,000 46,000 48,002
Legal & Professional 95,000 190,000 190,000
Patent/Copyright Registration Fees 5,000 10,000 20,000
(Estimated Indirect Product Development Total also includes 50% of unshaded expenses)
Marketing & Advertising 63,000 167,780 259,176
Office Expense 26,500 30,498 34,497
Payroll Expense 898,750 994,158 1,607,758
Employee Benefits 89,875 119,299 192,931
Payroll Taxes 242,663 268,423 434,095
Postage & Shipping 10,900 16,350 19,075
Rent 74,100 30,000 48,000
Telephone 30,950 67,112 103,670
Total Expenses 1,889,982 2,368,425 3,540,190
---------- ---------- ---------
REVENUE LESS EXPENSES (870,191) 2,385,415 7,291,578
========= ========== =========
================================================================================---------------------------------
</TABLE>
18
<PAGE>
In the event that only limited additional financing is received, the Company
understands that it may not be able to withstand the intense competition it may
face from larger and more adequately financed companies. Even if the Company
succeeds in obtaining the level of funding it considers necessary there are no
guarantees that these projected revenues and/or profits will materialize. In
fact, keeping in mind the possibility of spiralling R & D expenses involved with
developing new software and related technology, the Company can give no
assurances of any kind regarding funding, revenues, costs, expenses, and/or
profits.
Item 3: Description of Property
The Company's principal executive offices are located at 110 Roosevelt
Boulevard, Suite 101, Marmora, NJ, 08223. This facility contains approximately
four thousand (4,000) square feet of high-technology office space. The office is
fully supported with all the necessary computers, office equipment, and
furniture required to efficiently develop, market, and sell software products
and services to schools and other higher education institutions and
universities, including maintenance and training facilities located on premises.
The Company currently owns no real property.
Item 4: Security Ownership of Management and Certain Beneficial Owners
Owners of more than five (5) percent of any class of securities:
<TABLE>
<CAPTION>
=============================================================================================================
Title of Class Name and Address o Amount and Nature of Percent of Class
Beneficial Owner Beneficial Ownership
------------------------- ----------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
Common John Daglis 3,891,573 28.4%
------------------------- ----------------------------- -------------------------- --------------------------
Common Papaspanos 1,222,900 8.9%
------------------------- ----------------------------- -------------------------- --------------------------
Common Karavangelos 1,069,166 7.8%
=============================================================================================================
</TABLE>
Security Ownership of Management:
<TABLE>
<CAPTION>
=======================================================================================================================
Title of Class Name and Address of Beneficial Position Amount of Shares Percent of Class
Owner
-------------------- --------------------------------- --------------------- ----------------- ------------------------
<S> <C> <C> <C> <C>
Common John Daglis President, CEO, 3,891,573 28.4%
Dircetor
-------------------- --------------------------------- --------------------- ----------------- ------------------------
Common Grady Faircloth Director less than 5%
-------------------- --------------------------------- --------------------- ----------------- ------------------------
Common Joseph M. Gorgo Director less than 5%
-------------------- --------------------------------- --------------------- ----------------- ------------------------
Common George Karavangelos Director 1,069,166 7.8%
-------------------- --------------------------------- --------------------- ----------------- ------------------------
Common
=======================================================================================================================
</TABLE>
19
<PAGE>
Item 5: Directors, Executive Officers, Promoters, and Control Persons
John Daglis 35 President, CEO, Director
Grady Faircloth 49 General Sales Manager, Director
Joseph Gorgo 45 Purchasing & Consulting Account Manager,
Director.
George Karavangelos 29 Director
The following is a brief description of the business background of the executive
officers and directors of the Company.
John P. Daglis (President, CEO)
As the founder and President of Edumedia, since 1995,(7) Mr. Daglis established
company accreditation as a Microsoft Solutions Provider in Education, an IBM
Business Partner, a Certified Education Partner with Compaq, a Microsoft
Academic Authorized reseller, a Hewlett-Packard Authorized Dealer, and a
Symantec Enterprise Developer. Additional authorizations include Intel, 3Com,
and Nortell Networks, among others. During these years his company also gained
recognition as the First to offer MPEG technology to Schools in the state of New
Jersey (August 1993), and was featured by local newspapers in cover page
articles such as "Taking elementary students to the 21st Century", and "Local
entrepreneur's company helps schools secure technology grants".
Before Edumedia, Mr. Daglis rose in sales and executive management for 8 years
with Tandy Corporation in its Business Products and Education Divisions.
Grady Faircloth (General Sales & Senior Account Manager)
Mr. Faircloth is responsible for sales and marketing departments. Other
responsibilities include initial consultation with all new accounts, and
maintaining overview of communication with existing accounts, overseeing of all
proposal preparation and job costing, project planning, consulting, and training
instruction with all client engagements. Corresponds with office manager,
director of technical services and Purchasing account manager. Mr. Faircloth is
also Intel certified as an infrastructure analysis and design technician.
Grady W. Faircloth began working with Edumedia in January, 1998, and is
responsible for generating sales beyond the company's financial capacity through
strategic efforts and grant application management for school district clients.
Before Edumedia, Mr. Faircloth ran a private business as owner of three
audio/video retail stores which also offered services such as commercial
installations, computer design, computer networking, and custom installation and
design.
Joseph Gorgo (Purchasing & Consulting Account Manager)
Mr. Gorgo oversees all purchase orders (incoming/outgoing), and is responsible
for existing vendor relations and/or procurement of new vendors to assure best
pricing and maximum profit margin available. He is also responsible for
maintaining inventory overview/control of in-house and/or available product
(hardware/software), marketing assistance, proposal/bid/state contract
preparation assistance, daily reporting of in-house/available product (based on
current projects) provided to general sales manager, project manger, office
manager and director of technical services. Mr. Gorgo is also a CompTIA and A+
certified systems engineer.
20
<PAGE>
Joseph M. Gorgo began working with Edumedia in July 1997, and contributed
substantially to the growth of company sales and vendor relations, and is
directly responsible several company major brand name authorizations for
Edumedia. Before Edumedia, Mr. Gorgo advanced in sales and executive management
for 14 years with Tandy Corporation and its growing chain of Radio Shack and
Computer City stores.
George Karavangelos (Director)
George Karavangelos is the founder Blue Bell Financial Insurance Agency and
Financial services company; owner of the Bal Harbor Restaurant in Wildwood, NJ,
and is actively involved in the management of a number of retail and rental
properties in the Southern New Jersey Shore.
Item 6: Executive Compensation
John Daglis, the Company's President and Chief Executive Officer, was not paid a
salary for services performed for the Company in 1999, and has been paid a
salary of US$60,000 for the year 2000. This amount will be increased to
US$80,000 for the 2001 year, subject to the Company's receipt of at least
US$500,000. To date, no other executive compensation has been paid to any other
individual.
Item 7: Certain Relationships and Related Transactions
1. The Company was incorporated as Icon Acquisition Corp. ("Icon") in the
state of New York on November 28, 1994. Subsequent to its incorporation
8,573,337 shares of Icon Common Stock were issued to 1081 shareholders in
an offering pursuant to Regulation D, Rule 504. The Company was a
development stage company from that date until October 10, 2000 when it
acquired Edumedia, Inc., a New Jersey corporation, in a merger transaction.
See paragraph 5 below.
2. In August 1998 Edumedia, Inc. (NJ) acquired certain assets of a 9-year old
New Jersey state contracted vendor, GB Consulting. This company specialized
in the sale of computer hardware, software, services, networking, and
consulting to School Districts and commercial clients within the state of
New Jersey. Certain specified assets of GB Consulting were purchased by
Edumedia, Inc. excluding accounts receivable, short and long term
liabilities, which originated before August 1998, and bank accounts. Assets
listed in the agreement which the Company acquired included customer list
with over 1000 accounts (40 School Districts), the active New Jersey State
contract for mini/micro computer equipment as an approved vendor, and the
inventory and the fixed assets at location 129 North High Street.
Intangibles included Good Will and a covenant not to compete.
The Company paid $35,000 as down payment for a total purchase price of
$200,000. A 2% commission for sales was to be paid under a consulting
agreement with the prior proprietor of the business, George Chopeck, until
the total purchase price of $200,000 was thus fully paid.
3. In July of 1999, Edumedia NJ issued 500,000 Common Shares to Rosewood
International Investment Corporation in exchange for $25,000 and various
services.
21
<PAGE>
4. In September 1999, the Company entered into a consulting agreement with
Sierra Advisors, Inc. whereby Sierra would provide the Company with legal,
financial planning and consulting services in return for 125,000 shares of
its Common Stock, to be issued as per an S-8 registration with the
Securities and Exchange Commission.
5. On October 10, 2000 the Company merged Edumedia, Inc., a New Jersey
corporation incorporated on October 12, 1995 in a stock for stock exchange.
The Company agreed to acquire 100% of the outstanding shares of Edumedia,
Inc. in return for twelve million four hundred thousand four hundred
(12,400,000) restricted shares of Icon. As a result of the merger each
outstanding share of Common Stock of the surviving corporation was
converted into one-half (0.5) of one (1) share, and each share of the
predecessor corporation was converted into one (1) share of the surviving
corporation. Subsequent to the merger, the Company elected the Officers and
Directors of Edumedia, Inc. as its Officers and Directors8, who then
elected to change the name of the Company from Icon Acquisition Corp. to
Edumedia, Software Solutions Corporation. As such, the Company now performs
all operations and sells all products and services as Edumedia, Software
Solutions Corporation. As a result of the Merger, the Company's
capitalization consists of 20,000,000 authorized shares, of which
16,686,669 were issued and outstanding at that time.
6. During the 4th Quarter of 2000, the Company's Board of Directors voted to
re-purchase 2,973,160 common shares from the Company's President and CEO,
John Daglis, in satisfaction of debt owed by Mr. Daglis to the Company in
the amount of $598,356, or $.20 per share. As a result of said transaction,
the Company currently has 13,713,509 shares issued and outstanding.
Conflicts of Interest
Other than as described herein the Company is not expected to have significant
dealings with affiliates. If there are such dealings, the parties will attempt
to deal on terms competitive in the market and on the same terms that either
party would deal with a third person.
However, conflicts of interest are inherent in such dealings, and there is no
assurance that such transactions will be favorable to the Company, due to the
lack of arms length bargaining. Presently none of the officers and directors
have any transactions which they contemplate entering into with the Company,
aside from the matters described herein.
Management will attempt to resolve any conflicts of interest that may arise in
favor of the Company. Failure to do so could result in fiduciary liability to
management
The Company's By-laws indemnify its Officers and Directors against all costs and
expenses actually and necessarily incurred by him or her in connection with the
defense of any action, suit or proceeding in which he or she may be involved or
to which he or she may be made a party reason of his or her being or having been
such director or officer, except in relation to matters as to which he or she
shall be finally adjudged in such action, suit or proceeding to be liable for
negligence or misconduct in the performance of duty.
22
<PAGE>
Item 8: Description of Securities
(A). Common Stock
The Company is authorized to issue One Hundred Million (100,000,000) shares of
Common Stock (the "Common Stock") of par value of One Mil ($.001). As of this
date the Company has 13,713,509 shares of Common Stock issued and outstanding,
on a fully-diluted basis. Holders of Common Stock are each entitled to cast one
vote for each Share held of record on all matters presented to shareholders.
Cumulative voting is not allowed; hence, the holders of a majority of the
outstanding Common Stock can elect all directors.
Holders of Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor and,
in the event of liquidation, to share pro rata in any distribution of the
Company's assets after payment of liabilities. The Board of Directors in not
obligated to declare a dividend and it is not anticipated that dividends will be
paid in the near future.
Holders of Common Stock do not have preemptive rights to subscribe to additional
shares if issued by the Company. There are no conversion, redemption, sinking
fund or similar provisions regarding the Common Stock. All of the outstanding
Shares of Common Stock are fully paid and non-assessable and all of the Shares
of Common Stock offered thereby will be, upon issuance, fully paid and
non-assessable.
All of the Company's shares will contain the following or similar restrictive
legend to be placed on the certificates representing these securities:
"The securities represented by this certificate have not been registered under
the securities act of 1933, as amended, or under the securities laws of any
state. They have been acquired by the holder for investment and may not be sold,
transferred or otherwise disposed of in the absence of an effective registration
statement covering these securities under the 1933 act or laws, or an opinion of
legal counsel satisfactory to the company and its counsel that registration is
not required thereunder."
(B). Preferred Stock
Pursuant to the Certificate of Merger the Company amended its Certificate of
Incorporation to authorize issuance of Five Million (5,000,000) shares of
Preferred Stock (the "Preferred Stock") of par value of One Mil ($.001). As of
this date the Company has 24,000 shares of Preferred Stock issued and
outstanding.
Each share of Preferred Stock shall be convertible into five (5) shares of
Common Stock, at the option of the holder of such share of Preferred Stock.
Prior to such election and conversion, the holder of Preferred Stock will not be
entitled to vote in a meeting of shareholders.
23
<PAGE>
PART II
Item 1: Market for Common Stock, Dividends and Related Stockholder Matters
Holders of the Company's Common Stock are entitled to one vote per Share for
each Common Share held of record by Company shareholders.
To the best of the Company's knowledge, there is no "established trading market"
for the Company's common stock. At October 20, 2000, the Company's common stock
was not quoted on any recognized exchange, although Management intends on
trading its shares on the NASD's OTC Bulletin Board some time in the near
future.
As of October 20, 2000 there the Company had 13,713,509 shares of common stock
issued and outstanding, held by approximately 543 shareholders of record.
Of the Company's 13,713,509 shares of Common Stock, the 9,426,840 shares issued
to Edumedia, Inc. shareholders in the stock-for-stock exchange transaction are
deemed "restricted securities" as that term is defined in Rule 144 of the 1933
Securities Act ("Rule 144"), and may not be resold without registration under
the Securities Act. Provided certain requirements are met, these shares may be
resold pursuant to Rule 144 or may only be resold pursuant to another exemption
from the registration requirement.
The original Icon shareholders were issued 8,573,337 (4,286,669 post split)
shares under Rule 504 of Regulation D on or around October 1996 for a total of
$8,573.34, pursuant to a recapitalization according to the express provisions of
Rule 144(d)(3)(viii) and Release Number 6862 of the Securities and Exchange
Commission, whereby the holder's holding period for shares received in this
distribution will include the holding period commenced more than two years prior
to the date of the acquisition of the shares.
As such, any such shares which are held by a "non-affiliated person" of the
Company are not subject to any resale restrictions imposed by the 1933
Securities Act, so long as the seller has been a "non-affiliated person" of the
issuer for three months prior to the date of the sale, and that furthermore any
shares held by a "non-affiliated person" are not subject to the volume
limitations imposed by the 1933 Securities Act upon the resale thereof. In
addition, if any of these shares of Icon stock are held by non-affiliates for at
least one year since same were acquired from Icon or an affiliate, said shares
will be eligible for sale pursuant to Rule 144(k), provided such sale is not
prohibited by any of the other provisions of Rule 144.
Generally, Rule 144 provides that a holder of restricted shares of an issuer
which maintains certain available public information, where such shares are held
for two years or more, may sell in "brokers' transactions" every three months
the greater of: (a) an amount equal to one percent of the Company's outstanding
shares; or (b) an amount equal to the average weekly volume of trading in such
securities during the preceding four calendar weeks prior to the sale. A Form
144 must also be filed with SEC notifying that agency of the shares being sold
pursuant to Rule 144. Persons who are not affiliates of the Company may sell
shares beneficially owned for at least two years at the time of the proposed
sale without regard to volume or manner of sale restrictions. Lastly, there is
no existing public or other market for the Shares, and there is no assurance
that any such market will develop in the foreseeable future.
Dividend Policy
The Company does not currently intend to declare or pay any dividends on its
Common Stock for at least nine (9) months, except to the extent that such
payment is consistent with the Company's overall financial condition and plans
for growth. As the Company obtains the projected profits, substantial dividends
24
<PAGE>
may be delivered to the shareholders of record. Any future determination to
declare and pay dividends will be at the discretion of the Company's Board of
Directors and will be dependent on the Company's financial condition, results of
operations, cash requirements, plans for expansion, legal limitations,
contractual restrictions and other factors deemed relevant by the Board of
Directors.
Transfer Agent
As of October 1, 2000, the transfer agent for the Company's common stock is
Interwest Transfer Company, Inc., 1981 East Murray Holladay Road, Suite 100,
Salt Lake City, UT 84117, Attention Mr. Kurt Hughes.
Item 2: Legal Proceedings
Due to the cash flow problems suffered by the Company, as discussed earlier in
the Management's Discussion and Analysis section, the Company has certain
dissatisfied creditors who have either initiated legal proceedings, or are
threatening to do so. Following is a summary of actual or threatened legal
proceedings involving the Company.
Litigation
Summons were issued, and criminal proceedings have been instituted, against the
President of the Company, John P. Daglis, in regard to two complaints of
alleged. The prosecutor's office has now accepted a proposal to enter a
pre-trial intervention program within the state of New Jersey to satisfy the
following complaints:
1. Proteva $ 124,000.00
2. Micro Connections $ 24,000.00
3. Sun Bank $ 40,000.00
------------------------------------------------
TOTAL $ 188,000.00
The Company will indemnify John Daglis against these claims, and has accepted a
3-year pre-trial intervention instalments payment plan that was proposed by the
prosecutor's office to settle the complaints and eliminate further proceedings
in this regard.
Further, the Company will also indemnify Mr. Daglis against a complaint
initiated by the District Justice's office in Adams County, Pennsylvania for
alleged failure to take reasonable measures to restore property (US$49,000.00)
to the County of Adams after a mistaken overpayment made by the complainant, and
alleged failure to make required disposition of funds. The District Justice's
office has proposed a repayment plan to settle the complaint and eliminate
further proceedings.
(County of Adams, PA $ 49,000.00)
Following is a summary of other civil litigation which has been commenced
against the Company; the amounts involved, and the present state of the claims
are as listed:
1. Comtec Systems, Inc. $69,369.50
Filed complaint and received an order granting partial summary judgment;
2. Ingram Micro $38,637.04
Filed complaint; Co. has filed answer of denial; interrogatories taking place;
3. Merisel Americas, Inc. $35,631.29
Filed complaint; Co. has filed answer of denial (accepted out of time);
interrogatories taking place;
25
<PAGE>
4. Curtis $29,943.21
Filed complaint and received judgment against the Company on June 30, 2000;
5. System Warehouse $15,371.00
Filed complaint; Co. has filed answer of denial (accepted out of time);
interrogatories taking place;
6. PC Age, Inc. $8,601.15
Filed complaint; Co. has filed answer of denial in time;
7. TechData $4,500.00
Filed complaint; Co. has filed answer of denial in time;
8. Seneca Data Distributors $4,436.26
Filed complaint against Company; filed answer of denial in time; no
interrogatories taking place yet;
9. Infotel $4,400.00
Filed complaint; Co. has filed answer of denial (accepted out of time);
interrogatories taking place;
10. RC Maxwell $3,735.00
Filed complaint against Company; filed answer of denial in time; no
interrogatories taking place yet;
11. All Components $2,453.40
Filed complaint and received judgment against the Company on September 28, 2000;
and
12. Marlin Leasing Corp. $1,118.08
Filed complaint against Company; filed answer of denial in time; no
interrogatories taking place yet.
Threatened Litigation
The following complainants have made serious and credible threats to commence
civil litigation against the Company. However, as of the Reference Date no such
claims have, in fact been filed.
1. Leadman Electronics for $ 10,577.03
2. RLM Group for $ 9,653.25
3. Creative Computers for $ 1,971.00
4. AMP Electronics for $ 1,425.24
Settlements/Payment Plans
The Company owes taxes for the year 1999, for the payment of which liens and
payment plans are already in place.
1. TAXES: Federal Withholding $ 105,553.00
2. TAXES: Sales Tax $ 18,423.00
The Company has settled small claims with the following:
3. John L. Hoffman, CPA $ 948.50
($200/month payment plan)
26
<PAGE>
Item 3: Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no disagreements with accountants over any matters pertaining to
financial disclosure.
Item 4: Recent Sales of Unregistered Securities
1. Between December 1999 and March 2000 the Company issued Common Stock to
certain creditors in satisfaction of outstanding debt as follows:
No. of Investors Accredited(?) Common Shares Total $_invested
-------------------------------------------------------------------------
13 Accredited 3,232,781 $1,237,423
7 Non-Accredited 1,101,145 $ 420,422
The Company believes that this offering is exempt from registration under
Section 4(2) of the 1933 Securities Act.
2. In a private placement of its Common Stock conducted between July 20, 1999
and December 31, 1999, which offering the Company believes is exempt from
registration under Section 4(2) of the 1933 Securities Act, the Company
sold securities as follows:
No. of Investors Accredited(?) Common Shares Total $_invested
-------------------------------------------------------------------------
4 Accredited 174,722 $ 44,250
4 Non-Accredited 26,786 $ 30,000
3. In a private placement of its Common Stock conducted between January 1,
2000 and August 31, 2000, which offering the Company believes is exempt
from registration under Section 4(2) of the 1933 Securities Act, the
Company sold securities as follows:
No. of Investors Accredited(?) Preferred Shares Total $_invested
-------------------------------------------------------------------------
1 Accredited 24,000 $ 30,000
No. of Investors Accredited(?) Common Shares Total $_invested
11 Accredited 399,498 $ 141,000
23 Non-Accredited 104,162 $ 103,329
Item 5: Indemnification of Directors and Officers
The Bylaws of the Company provide for indemnification of its directors, officers
and employees as follows: "Each Director and Officer of this corporation shall
be indemnified by the corporation against all costs and expenses actually and
necessarily incurred by him or her in connection with the defense of any action,
suit or proceeding in which he or she may be involved or to which he or she may
have been made a party by reason of his or her being or having been such
director or officer, except in relation to matters as to which he or she shall
be finally adjudged in such action, suit or proceeding to be liable for
negligence or misconduct in the performance of duty."
27
<PAGE>
The Bylaws of the Company further states that the Company shall provide to any
person who is or was a director, officer, employee or agent of the Corporation
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of the corporation, partnership, joint venture, trust or
enterprise, the indemnity against expenses of a suit, litigation or other
proceedings which is specifically permissible under applicable New York law.
The Board of Directors may, in its discretion, direct the purchase of liability
insurance by way of implementing the provisions of this Article. However, the
Company has yet to purchase any such insurance and has no plans to do so. The
Articles of Incorporation of the Company states that a director or officer of
the corporation shall not be personally liable to this corporation or its
stockholders for damages for breach of fiduciary duty as a director or officer,
but this Article shall not eliminate or limit the liability of a director or
officer for (i) acts or omissions which involve intentional misconduct, fraud or
a knowing violation of the law or (ii) the unlawful payment of dividends. Any
repeal or modification of this Article by stockholders of the corporation shall
be prospective only, and shall not adversely affect any limitation on the
personal liability of a director or officer of the corporation for acts or
omissions prior to such repeal or modification.
These provisions in the Bylaws are in accordance with the statutory directives
of the New York Business Corporation Law.9 Section 722 of NYBCL specifically
authorizes a corporation to indemnify its officers and/or directors against
actions or proceedings arising out of their performance of duties as officers
and directors of the company, or as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or enterprise at the
request of the company, if such officer or director acted in good faith for a
purpose he reasonably believed to be in the best interest of the company.
Section 726 of NYBCL authorizes a company to purchase and maintain insurance
protection for its officers and directors.
--------
28
<PAGE>
FOOTNOTES
---------
1 See Icon Acquisition Corp. Certificate of Incorporation as Exhibit __.
2 See Agreement of Merger between Icon and Edumedia, Inc. dated April 26, 2000
as Exhibit __.
3 See Certificate of Merger between Icon and Edumedia, Inc. filed in New York
on October 12, 2000 as Exhibit __.
4 See the Consulting Agreement attached as Exhibit __.
5 Section 27A(b)(2)(D) of the Securities Act of 1933, and Section 21E(b)(2)(D)
of the Securities Exchange Act of 1934 state that the safe harbor for forward
looking statements applies to statements made by issuers that are subject to
the reporting requirements of Section 13(a) or Section 15(d) of the
Securities Exchange Act at the time the statement is made. Therefore, the
Litigation Reform Act's safe harbor does not apply to statements contained in
this registration statement.
6 This information contains forward-looking statements and therefore may
involve known and unknown risks and uncertainties and other factors that may
cause the actual results, performance and achievements of the Company to be
materially different from those expressed or implied by such forward-looking
statements. Some of the factors that may cause such material differences are
set forth as risk factors detailed from time to time in the Company's
periodic reports and other financial statements, and herein.
7 Mr. Daglis started the business as a sole proprietorship in 1992 and
incorporated it into a New Jersey company Edumedia, Inc. in 1995.
8 See Certificate of Merger and Plan of Merger attached in the Exhibits.
9 See Sections 721-726 of New York Business Corporation Law.
29
<PAGE>
ICON ACQUISITION CORP.
(A NEW YORK CORPORATION)
ROCHESTER, NEW YORK
FINANCIAL REPORTS
AT
OCTOBER 4, 1996
F-1
<PAGE>
ICON ACQUISITION CORP.
(A New York Corporation)
Rochester, New York
TABLE OF CONTENTS
-----------------
Independent Auditor's Report 1
Balance Sheet at October 4, 1996 2
Statement of Stockholders' Equity for the Period
November 28, 1994 (Date of Inception) to October 4, 1996 3
Notes to Financial Statements 4
F-2
<PAGE>
ROTENBERG & COMPANY, LLP
Certified Public Accountants & Consultants
500 First Federal Plaza
Rochester, N.Y 14614
(716) 546-1158 Fax (716) 546-2943
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
and Stockholders
Icon Acquisition Corp.
Rochester, New York
We have audited the accompanying balance sheet of Icon Acquisition
Corp. (a New York Corporation) as of October 4, 1996, and the related statement
of stockholders' equity for the period November 28, 1994 (date of inception) to
October 4, 1996. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet and statement of
stockholders' equity are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the balance sheet and statement of
stockholders' equity. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the balance sheet and statement of stockholders' equity
present fairly, in all material respects, the financial position of Icon
Acquisition Corp. as of October 4, 1996, in conformity with generally accepted
accounting principles.
By: /s/ Rotenberg & Company, LLP
--------------------------------
Rotenberg & Company, LLP
Rochester, New York
October 4, 1996
F-3
<PAGE>
ICON ACQUISITION CORP.
(A New York Corporation)
Rochester, New York
BALANCE SHEET AT OCTOBER 4, 1996
--------------------------------
ASSETS
------
Cash and Cash Equivalents $ --
Accounts Receivable --
Marketable Securities --
Inventory --
Organizational Expense 8,573
Start-Up Costs 863
---------
Total Assets $ 9,436
------------ =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities
-----------
Accounts Payable $ --
Accrued Expense --
Customer Deposits and Advances --
New York State Franchise Taxes Payable and Accrued 863
---------
Total Liabilities $ 863
----------------- ---------
Stockholders' Equity
Common Stock: $.001 Par; 20,000,000 Shares Authorized,
8,573,337 Shares Issued and Outstanding 8,573
Additional Paid In Capital --
Retained Earnings --
---------
Total Stockholders' Equity $ 8,573
-------------------------- ---------
Total Liabilities and Stockholders' Equity $ 9,436
------------------------------------------ =========
The accompanying notes are an integral part of this financial statement and
should be read in conjunction therewith.
F-4
<PAGE>
ICON ACQUISITION CORP.
(A New York Corporation)
Rochester, New York
STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD
------------------------------------------------
NOVEMBER 28 1994 (DATE OF INCEPTION) TO OCTOBER 4 1996
------------------------------------------------------
<TABLE>
<CAPTION>
Additional
Number Par Common Paid In Retained Stockholders'
of Shares Value Stock Capital Earnings Equity
--------- ------- ------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance - November 28, 1994 --- $ -- $ -- $ -- $ -- $ --
Common Stock Issued December 5 1994 8,573,337 .001 8,573 -- -- 8,573
Net Income for the Period
November 28, 1994 to October 4 1996 --- -- -- -- -- --
Distribution-- October 2 1996 --- -- -- -- -- --
--------- ------- ------- ---------- -------- -------------
Balance - October 4, 1996 8,573,337 $ .001 $ 8,573 $ -- $ -- $ 8,573
========= ======= ======= ========== ======== =============
</TABLE>
The accompanying notes are an integral part of this financial statement and
should be read in conjunction therewith.
F-5
<PAGE>
ICON ACQUISITION CORP.
(A New York Corporation)
Rochester, New York
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Note A - Summary of Sinnificant Accounting Policies
Method of Accounting
The corporation maintains its books and prepares its financial
statements on the accrual basis of accounting. .
Note B - Scope of Business
The corporation was formed on November 28, 1994 under the laws of the
State of New York. The corporation has been inactive since its
formation and has never conducted any business.
Note C - Organizational Expenses
Organizational expenses represent management, consulting, legal,
accounting, and filing fees, incurred to date in the formation of the
corporation.
Note D - New York State Franchise Taxes Payable and Accrued
All corporations formed under New York State law, whether active or
inactive, are subject to annual minimum New York State franchise taxes
and filing fees. The corporation has provided for these costs for the
period November 28, 1994 through October 4, 1996 and are included in
start-up costs.
Note E - Issuance of Common Stock
On December 5, 1994, the corporation issued 8,573,337 shares of its
common stock to Icon Holding Company (the former stockholders of SLP
Technology Corp.) in exchange for all of its assets for and in
consideration of Icon Holding Company funding certain legal and other
expenses of the corporation.
A summary of the assigned fair value of the assets received from the
trust in exchange for the corporation's common stock follows:
Various Stock Securities $ --
Organization Expenses of Forming,
the Corporation (See Note C) 8,573
-------
Total $ 8,573
=======
Note F - Distribution - Spin-Off
On October 2, 1996, the corporation transferred all of its tangible
assets (stock securities) to Neft Holding Co. for the benefit of the
stockholders of record as of October 2, 1996, for and in consideration
of Neft Holding Company funding certain legal and other expenses of the
corporation. Said stock securities had no carrying value on the
corporate books and had no ascertainable fair value at the date of the
distribution.
F-6
<PAGE>
ICON ACQUISITION CORP.
(A DEVELOPMENT STAGE COMPANY)
(A NEW YORK CORPORATION)
Rochester, New York
FINANCIAL REPORTS
AT
MARCH 31, 2000
F-7
<PAGE>
ICON ACQUISITION CORP.
(A DEVELOPMENT STAGE COMPANY)
(A NEW YORK CORPORATION)
Rochester, New York
TABLE OF CONTENTS
================================================================================
Independent Auditor's Report 1
Balance Sheet at March 31, 2000 2
Statement of Changes in Stockholders' Deficit for the Period From
Date of Inception (November 28, 1994) through March 31, 2000 3
Statement of Operations for the Three Years Ended March 31, 2000,
1999 and 1998 and for the Period From Date of Inception
(November 28, 1994) through March 31, 2000 4
Statement of Cash Flows for the Three Years Ended March 31, 2000,
1999 and 1998 and for the Period From Date of Inception
(November 28, 1994) through March 31, 2000 5
Notes to Financial Statements
F-8
<PAGE>
ROTENBERG & COMPANY, LLP
Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
and Stockholders
Icon Acquisition Corp.
Rochester, New York
We have audited the accompanying balance sheet of Icon Acquisition
Corp. (A Development Stage Company) (A New York Corporation) as of March 31,
2000, and the related statements of operations, changes in stockholders'
deficit, and cash flows for each of the three years in the period ended March
31, 2000 and for the period from date of inception (November 28, 1994) through
March 31, 2000. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Icon Acquisition
Corp. as of March 31, 2000, and the results of its operations and its cash flows
for each of the three years in the period ended March 31, 2000 and for the
period from date of inception (November 28, 1994) through March 31, 2000, in
conformity with generally accepted accounting principles.
By: /s/ ROTENBERG & COMPANY, LLP
--------------------------------
Rotenberg & Company, LLP
Rochester, New York
April 3, 2000
F-9
<PAGE>
ICON ACQUISITION CORP.
(A DEVELOPMENT STAGE COMPANY)
(A NEW YORK CORPORATION)
Rochester, New York
BALANCE SHEET
================================================================================
March 31, 2000
ASSETS
Current Assets $ -
--------------------------------------------------------------------------------
Total Assets $ -
================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities
Accrued Franchise Taxes $ 1,668
Accrued Penalties and Interest 949
--------------------------------------------------------------------------------
Total Liabilities 2,617
================================================================================
Stockholders' Deficit
Common Stock: $.001 Par; 20,000,000 Shares Authorized,
8,573,337 Shares Issued and Outstanding 8,573
Deficit (11,190)
--------------------------------------------------------------------------------
Total Stockholders' Deficit (2,617)
--------------------------------------------------------------------------------
Total Liabilities and Stockholders' Deficit $ -
================================================================================
The accompanying notes are an integral part of this financial statement.
F-10
<PAGE>
ICON ACQUISITION CORP.
(A DEVELOPMENT STAGE COMPANY)
(A NEW YORK CORPORATION)
Rochester, New York
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
============================================================================================================================
For the Period From Date Additional Total
of Inception (November 28, 1994) Number Par Common Paid-In Stockholders'
through March 31, 2000 of Shares Value Stock Capital Deficit Deficit
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Inception - November 28, 1994 - $ - $ - $ - $ - $ -
Common Stock Issued -
December 5, 1994 8,573,337 0.001 8,573 - - 8,573
Net Loss - - - - (8,573) (8,573)
----------------------------------------------------------------------------------------------------------------------------
Balance - March 31, 1995 8,573,337 0.001 8,573 - (8,573) -
Net Loss - - - - (500) (500)
----------------------------------------------------------------------------------------------------------------------------
Balance - March 31, 1996 8,573,337 0.001 8,573 - (9,073) (500)
Net Loss - - - - (632) (632)
----------------------------------------------------------------------------------------------------------------------------
Balance - March 31, 1997 8,573,337 0.001 8,573 - (9,705) (1,132)
Net Loss - - - - (553) (553)
----------------------------------------------------------------------------------------------------------------------------
Balance -March31, 1998 8,573,337 0.001 8,573 - (10,258) (1,685)
Net Loss - - - - (493) (493)
----------------------------------------------------------------------------------------------------------------------------
Balance - March 31, 1999 8,573,337 0.001 8,573 - (10,751) (2,178)
Net Loss - - - - (439) (439)
----------------------------------------------------------------------------------------------------------------------------
Balance - March 31, 2000 8,573,337 $ 0.001 $ 8,573 $ - $ (11,190) $ (2,617)
============================================================================================================================
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-11
<PAGE>
ICON ACQUISITION CORP.
(A DEVELOPMENT STAGE COMPANY)
(A NEW YORK CORPORATION)
Rochester, New York
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
============================================================================================
For the Period From
Date of Inception
(November 28, 1994) Years Ended March 31,
Through
March 31, 2000 2000 1999 1998
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ - $ - $ - $ -
Expenses
Organizational Costs (8,573) - - -
Franchise Taxes, Filing Fees,
Penalties and Interest (2,617) (439) (493) (553)
--------------------------------------------------------------------------------------------
Net Loss for the Period $ (11,190) $ (439) $ (493) $ (553)
============================================================================================
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-12
<PAGE>
ICON ACQUISITION CORP.
(A DEVELOPMENT STAGE COMPANY)
(A NEW YORK CORPORATION)
Rochester, New York
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
================================================================================================================
For the Period From
Date of Inception
(November 28, 1994) Years Ended March 31,
Through
March 31, 2000 2000 1999 1998
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net Loss for the Period $ (11,190) $ (439) $ (493) $ (553)
Non-Cash Adjustments:
Organizational Costs 8,573 - - -
Changes in Assets and Liabilities:
Accrued Franchise Taxes 1,668 325 325 325
Accrued Penalties and Interest 949 114 168 228
----------------------------------------------------------------------------------------------------------------
Net Cash Flows from Operating Activities - - - -
----------------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents - - - -
Cash and Cash Equivalents -
Beginning of Period - - - -
----------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents -
End of Period $ - $ - $ - $ -
================================================================================================================
NON-CASH FINANCING ACTIVITIES
================================================================================================================
Organizational Costs Paid by Stockholders
in exchange for Common Stock $ (8,573) $ - $ - $ -
Common Stock Issued $ 8,573 $ - $ - $ -
================================================================================================================
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-13
<PAGE>
ICON ACQUISITION CORP.
(A DEVELOPMENT STAGE COMPANY)
(A NEW YORK CORPORATION)
Rochester, New York
NOTES TO FINANCIAL STATEMENTS
================================================================================
Note A - Summary of Significant Accounting Policies
Method of Accounting
The Company maintains its books and prepares its financial statements
on the accrual basis of accounting.
Note B - Scope of Business
Icon Acquisition Corp. ("The Company') was formed in November, 1994,
under the laws of the State of New York. The Company was dormant until
March, 2000, when it was determined to commence general business.
Note C - Organizational Expenses
Organizational expenses represent management, consulting, legal,
accounting, and filing fees, incurred to date in the formation of the
Company. Organizational costs are expensed as incurred per Statement of
Position 98-5 on reporting on the costs of start-up activities.
Note D - New York State Franchise Taxes Payable and Accrued
All corporations formed under New York State law, whether active or
inactive, are subject to annual minimum New York State franchise taxes
and filing fees. The Company has provided for these costs for the
period November 28, 1994 through March 31, 2000.
Note E - Common Stock
Since inception, the Company has had all of its organizational costs
(See Note C) paid by the shareholders. The shareholders paid $8,573 for
these services for which they received 8,573,337 shares of the
Company's common stock.
F-14
<PAGE>
EDUMEDIA, PNC
FINANCIAL STATEMENTS
Year ended December 31, 1998
F-15
<PAGE>
EDUMEDIA, INC
TABLE OF CONTENTS
Year Ended December 31, 1998
.
Page Number
-----------
INDEPENDENT AUDITORS' REPORT.....................................1
FINANCIAL STATEMENTS
Balance Sheet ..........................................2-3
Statement of Income.....................................4
Statement of Retained Earnings..........................5
Statement of Cash Flows.................................6-7
Notes to the Financial Statements.......................8-11
F-16
<PAGE>
DEMBA & ASSOCIATES
CERTIFIED PUBLIC ACCOUNTANTS
742 US HWY 206 SO. 912-3 RENATE DR.
BELLE MEAD, NJ 08502 HILLSBOROUGH, NJ 08876
TEL: (908) 359-0900 TEL: (908) 359-0222
FAX: (908) 359-8511 FAX: (908) 359-8573
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of Edumedia, Inc.
We have audited the accompanying balance sheet of Edumedia, Inc. as of December
31, 1998 and the related statements of income and retained earnings and cash
flows for the year then ended. The financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards, Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures ire the financials statements. An audit also
includes assessing the accounting principles used and the significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide reasonable basis for our
opinion.
In our opinion, the financial statements refereed to above present fairly, in
all material respects the financial position of Edumedia, Inc. as of December
31, 1998 ,and the results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting principles.
Hillsborough, New Jersey
July 21, 2000
By: /s/ Demba & Associates
--------------------------
Demba & Associates
F-17
<PAGE>
EDUMEDIA, INC.
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
CURRENT ASSETS
CASH - PETTY CASH (ON HAND) $ 634.18
CASK. GENERAL OPERATING A/C 52.28
CASH, CORP. OPERATING A/C 22,793.67
CASH, PAYROLL A/C 37.69
ACCOUNTS RECEIVABLE - TRADE 673,929.86
PREPAID EXP'S, CONSULTING FEES 20,868,95
INVENTORY - HARDWARE/SOFTWARE 253,628.36
PREPAID INSURANCE 1,108.00
------------
TOTAL CURRENT ASSETS 972,952.99
FIXED ASSETS
MACHINERY & EQUIPMENT 36,950.23
A/D - MACH1NERY & EQUIPMENT (26,564.51)
DEF. FINANCING COSTS 4,480.00
A/A - DEF. FINANCING COSTS (448.00)
------------
T0TAL FIXED ASSETS 14,417.72
OTHER ASSETS
SHAREHOLDER LOANS REC. 223,072.24
------------
TOTAL OTHER ASSETS 223,072.24
-------------
TOTAL ASSETS $1,210,442.95
=============
See accompanying notes to Financial Statements and
Independent Auditors' Report
F-18
<PAGE>
EDUMEDIA, INC.
BALANCE SHEET
DECEMBER 31, 1998
LIABILITIES AND EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE - TRADE $ 345,234.61
ACCRUED EXPENSES 10,000.00
PAYROLL TAXES PAYABLE 20,525.45
CURRENT PORTION - LOAN PAY SBA 3,515.94
NJ SALES TAX PAYABLE 2,581.05
PLEDGED RECEIVABLES CONTG LIAB 604,794.28
------------
TOTAL CURRENT LIABILITIES 986,651.23
LONG-TERM LIABILITIES
LOAN PAYABLE - SBA 59,378.70
------------
TOTAL LUNG-TERM LIABILI'T'IES 59,378.70
--------------
TOTAL LIABILITIES 1,046,1023.93
EQUITY
CAPITAL STOCK 3, 000.00
ADDITIONAL PAID IN CAPITAL 9,000.00
RETAINED EARNINGS - PRIOR 62,906.00
RETAINED EARNINGS--CURRENT YEAR 89,507.02
------------
TOTAL EQUITY 164,413.02
--------------
TOTAL LIABILITIES AND EQUITY $ 1,210,442.95
==============
See accompanying notes to Financial Statements and
Independent Auditors' Report
F-19
<PAGE>
EDUMEDIA INC.
INCOME STATEMENT
FOR THE 12 PERIODS ENDED DECEMBER 31, 1998
YEAR TO DATE
ACTUAL PERCENT
REVENUE
REVENUE $ 2,125,101.49 100.0%
--------------- -------
TOTAL REVENUE 2,125,101.49 100.0
GROSS PROFIT 2,125,101.49 100.0
OPERATING EXPENSES
PURCHASES 1,394,685.14 65.6
SALARIES 280,293.38 13.2
COMMISSIONS 469.17 .0
PAYROLL TAX EXPENSE 37,083.18 1.7
OFFICE SUPPLIES & STAT'Y 23,931.44 1.1
POSTAGE & SHIPPING 20,276.29 1.0
DATA & P/R PROCESSING FEES 174.40 .0
RENT 18,339.00 .9
TELEPHONE 20,948.64 1.0
INSURANCE 9,104.13 .4
PROFESSIONAL DUES & ASSN'S 2,124.90 .1
ADVERTISING 29,681.50 1.4
INTEREST EXPENSE 102,512.96 4.8
DEPRECIATION 5,426.38 .3
AMORTIZATION 448.00 .0
AUTO & TRAVEL 10,969.45 .5
PROFESSIONAL FEES 40,113.94 1.9
LICENSE & REGISTRATION FEES 530.00 .0
EMPLOYEE BENEFITS 5,138.31 .2
MEALS & ENTERTAINMENT 3,111.14 .1
TRAVEL & LODGING 9,090.87 .4
MISCELLANEOUS 269.43 .0
OFFICE EQUIPMENT RENTAL/LEASE 2,060.66 .1
INTEREST INCOME (14.81) .0
FACTOR FEES 18,806.99 .9
--------------- -------
TOTAL OPERATING EXPENSES 2,035,594.47 95.8
--------------- -------
NET INCOME FROM OPERATIONS 89,507.02 4.2
--------------- -------
EARNINGS BEFORE INCOME TAX 89,507.02 4.2
--------------- -------
NET INCOME $ 89,507.02 4.2%
=============== =======
See accompanying notes to Financial Statements and
Independent Auditors' Report
F-20
<PAGE>
EDUMEDIA, INC.
STATEMENT OF RETAINED EARNINCS
FOR THE YEAR ENDED DECEMBER 31, 1998
RETAINED EARNINGS, BEGINNING OF YEAR $ 62,996.04
NET INCOME 89,507.02
-------------
RETAINED EARNINGS, END OF YEAR $ 152,413.02
=============
See accompanying notes to Financial Statements and
Independent Auditors' Report
F-21
<PAGE>
EDUMEDIA, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS PROVIDED FROM OPERATING ACTIVITIES
Cash Received from Customers $ 1,665.598.63
Cash Paid to Vendors, Employees & Other Operating Expenses (1,302.736.55)
Taxes Paid (37,083.19)
Interest Income 14.81
Interest Expense (102,512.96)
--------------
Net Cash Provided by Operating Activities 223,280.75
--------------
CASE FLOWS FROM INVESTING ACTIVITIES
Fixed Asset Acquisitions - Equipment (5,046.23)
Intangible Asset Costs - Def. Financing (4,480.00)
Shareholder Loans (254,788.24)
--------------
Net Cash (Used) by Investing Activites (264,314.47)
--------------
CASH FLOWS FROM FINANCING ACTIVITES
SBA Loan Proceeds 75,000.00
Principal Payments on SBA Loan Payable (12,105.46)
--------------
Net Cash Provided by Financing Activities 62,894.54
--------------
Net Increase in Cash & Cash Equivalents $ 21,860.82
Cash & Cash Equivalents, Beginning of Year 1,657.00
--------------
Cash & Cash Equivalents, End of Year $ 23,517.82
==============
</TABLE>
See accompanying notes to Financial Statements and
Independent Auditors' Report
F-22
<PAGE>
EDUMEDIA, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 89,507.02
Adjustments to reconcile net to net cash
provided by operatinq activities:
Depreciation and Amortization 5,874.38
(Increase) decrease in:
Accounts Receivable - Trade (459,502.86)
Inventory - Hardware/Software/WIP (158,357.36)
Prepaid Expenses - Other (20,868.95)
Increase (decrease) in:
Accounts Payable - Trade 123,795.61
Accrued Expanses (128.00)
Payroll Taxes Payable (12,947.55)
NJ Sales Taxes Payable (8,492.95)
Loan Payable - SBA 59,378.70
Pledged Acconts Receivable Contingent Liab. 604,794.28
Other Liabilities 846.75
------------
Total Adjustments: 133,773.73
------------
Net Cash Provided by Operating Activities $ 223,280.75
============
See accompanying notes to Financial Statements and
Independent Auditors' Report
F-23
<PAGE>
EDUMEDIA, INC.
Notes to Financial Statements
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Description of Business: Edumedia, Inc., designs, develops, markets, services,
and trains by providing software solutions with emerging computer technology.
Primarily focussing on implementing the state of art computer knowledge in the
school system.
Cash and Equivalents: For the purpose of the statements of cash flows, cash
equivalents include time deposits, certificates of deposit and all highly liquid
debt instruments with original maturities of three months or less.
Inventories: Inventories are valued at the lower of cost (determined on a
last-in, first-out basis) or market,
Bad debts: The Company has adopted the direct write-off of bad debts method.
Property and Equipment: Equipment, furniture, and improvements are stated at
cost. Depreciation and amortization are provided over the estimated useful lives
of the assets by the straight-line method. Property and equipment are estimated
to have 5-7 year lives. Repairs and maintenance expenditures which do not extend
the useful lives of the related assets are expensed as incurred.
Income Taxes and Retained Earnings: The Company has elected to file as an "S"
Corporation for Federal and State income taxes purposes, thus income is taxed to
trio shareholders personally. Accordingly, no provision for such taxes has been
made in the accompanying financial statements,
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Although these estimates are based on management's knowledge
of current events and actions it may undertake in the future, they may
ultimately differ from actual results.
NOTE 2 - CONCENTRATIONS OF BUSINESS AND CREDIT RISK
The Company maintains cash balances which may exceed federally insured limits.
They historically have not experienced any credit related losses. The Company
provides credit in the normal course of business to customers located primarily
in the northeastern portion of the U.S. The Company performs ongoing credit
evaluations of its customers and maintains allowances for doubtful accounts
based on factors surrounding the credit risk of specific customers, historical
trends, and other information.
See accountants report on financial statements'
F-24
<PAGE>
EDUMEDIA, iNC.
Notes to Financial Statements
NOTE 3 - INVENTORIES
Work in process-Hardware/Software $ 253,522.36
------------
Total $ 253,528.36
============
NOTE 4 - PROPERTY AND EQUIPMENT
Property anud equipment at cost less accumulated depreciation and amortization,
consists of the following:
Equipment $ 34,362.23
Office furniture & Fixtures 520.00
Computer software 2,068.00
------------
Subtotal 36,950.23
Less accumulated depreciation and amortization 26,564.51
------------
Net Book Value $ 10,385.72
============
Depreciation expense charged to operations was $ 5,426.38
NOTE 5 - INTANGIBLE ASSETS
Intangible assets consists of deferred financing costs. These costs are being
amortized over the life of the loan (10) years.
Amortization expense for the year 1998 was $ 448.00.
See accountants report on financial statements
F-25
<PAGE>
EDUMEDIA, INC
Notes to Financial Statements
NOTE 6 - DEBT
The note payable represents an unsecured demand note from SBA with an interest
at 10.50%. The maturities of long-term debt outstanding for the next five years
are as follows:
Year Ending December 31,
1999 $ 3,515.84
2000 3,903.33
2001 4,333.46
2002 4,811,04
2003 5,341,24
Thereafter 37,473.79
------------
Total debt $ 59,378.70
============
Interest expense for the year ended December 31, 1998 was $ 102,512.96.
NOTE 7 - OPERATING LEASE COMMITMENTS
Following is a summary of rental expenses under all operating leases:
Office rent $ 18,339.00
Equipment lease 2,060.66
------------
$ 20,399,66
============
NOTE 8 - TRADE - ACCOUNTS RECEIVABLE
Trade accounts receivable consist of the following:
Current receivables $ 673,929.86
------------
$ 673,929.86
============
See accountants report on financial statements
[GRAPHIC OMITTED]
F-26
<PAGE>
EDUMEDIA,, 1NC
Notes to Financial Statements
NOTE 9 - OPERATING LEASE COMMITMENTS
The Company leases certain office spaces and equipment under operating leases.
The following is a schedule of future minimum rental payments (exclusive of
common area charges) required under operating leases that have initial or
remaining noncancelable lease terms in excess of one year as of December 31,
1998.
Year Ending De"rnber 31,
1999 $ 5,470.44
2000 5,470.44
2001 5,470.44
2002 5,470.44
2003 3,646.96
Thereafter -0-
------------
Total minimum payment required $ 27,352.20
============
NOTE 10 -FACTORED COMMITMENTS AND CONTIGENCIES
The Company is contingently liable on a trade receivable which was sold/factored
with recourse in 1998. The trade receivable, which is currently not in default,
is due with an unpaid balance of $ 604,794.28 at December 31, 1998.
The Company and certain of its officers are defendants in various lawsuits, some
of which seek substantial monetary damages. The lawsuits include those brought
against the Company for not meeting its obligations. Management believes the
outcome of such lawsuits will not have a material adverse effect on the
Company's financial position or results of operations.
NOTE 11- RELATED PARTY TRANSACTIONS
Stockholder loans receivable consists of loan by the Company to the officer of
the Company. These amounts are due upon demand and carry no stated interest.
See accountants report on financial statements
F-27
<PAGE>
EDUMEDIA, INC.
FINANCIAL STATEMENTS
Year Ended December 31, 1999
F-28
<PAGE>
EDUMEDIA, INC.
Table of Contents
Year ended December 31, 1999
Page Number
-----------
INDEPENDENT AUDITORS' REPORT................................. 1
FINANCIAL STATEMENTS
Balance Sheet....................................... 2-3
Statement of Loss................................... 4
Statement of Retained Earnings...................... 5
Statement of Cash Flows............................. 6-7
Notes to the Financial Statements................... 8-12
F-29
<PAGE>
DEMBA & ASSOCIATES
Certified Public Accountants
742 US HWY 206 So. 912-3 RENATE DR.
BELLE MEAD, NJ 08502 HILLSBOROUGH, NJ 08876
TEL: (908) 359-0900 TEL: (980) 359-0222
FAX: (908) 359-8511 FAX: (908) 359-8573
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Edumedia, Inc.
We have audited the accompanying balance sheet of Edumedia, Inc. as of December
31, 1999 and the related statements of loss and retained earnings and cash flows
for the year then ended. The financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financials statements. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects the financial position of Edumedia, Inc. as of December
31, 1999 and the results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting principles.
Hillsborough, New Jersey
July 31, 2000
By: /s/ Demba & Associates
--------------------------
Demba & Associates
1
F-30
<PAGE>
EDUMEDIA INC.
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
CURRENT ASSETS
CASH, GENERAL OPERATING A/C $2,083.41
CASH, CORP. OPERATING A/C 1,647.97
CASH, PAYROLL A/C 1,867.70
ACCOUNTS RECEIVABLE - TRADE 918,556.95
INVENTORY - HARDWARE/SOFTWARE 220,786.54
INVENTORY - WORK IN PROCESS 803,344.07
RENTAL SECURITY DEPOSITS REC. 2,298.85
--------
TOTAL CURRENT ASSETS 1,950,585.49
FIXED ASSETS
MACHINERY & EQUIPMENT 86,604.53
A/D - MACHINERY & EQUIPMENT (39,637.51)
-----------
TOTAL FIXED ASSETS 46,967.02
OTHER ASSETS
DEF. FINANCING COSTS 12,617.72
A/A - DEF. FINANCING COSTS (2,022.00)
GOODWILL 20,000.00
COVENANT NOT TO COMPETE 15,000.00
A/D - GOODWILL/COVENANT (7,000.00)
SHAREHOLDER LOANS REC. 838,632.39
----------
TOTAL OTHER ASSETS 877,228.11
----------
TOTAL ASSETS $2,874,780.62
=============
See accompanying notes to Financial Statements and
Independent Auditors' Report
2
F-31
<PAGE>
EDUMEDIA INC.
BALANCE SHEET
DECEMBER 31, 1999
LIABILITIES AND EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE - TRADE $904,372.07
ACCRUED EXPENSES 71,524.74
BANK OVERDRAFT 41,139.66
ACCRUED INTEREST PAYABLE 45,568.46
NOTES PAYABLE - OTHER 86,500.00
PAYROLL TAXES PAYABLE 148,011.04
NOTES PAYABLE - BRIDGE LOAN 208,616.34
CURRENT PORTION - LOAN PAY SBA 9,142.52
DEFERRED REVENUE 554,546.00
NJ SALES TAX PAYABLE 18,423.00
PLEDGED RECEIVEABLES CONTG LIAB 242,676.69
----------
TOTAL CURRENT LIABILITIES 2,330,520.52
LONG - TERM LIABILITIES
LOAN PAYABLE - SBA 165,814.02
NOTE PAYABLE - GB CONSULT ACQ. 35,000.00
---------
TOTAL LONG - TERM LIABILITIES 200,814.02
----------
TOTAL LIABILITIES 2,531,334.54
EQUITY
CAPITAL STOCK, 10000025 SH O/S 1,195,200.00
ADDITIONAL PAID IN CAPITAL 9,000.00
RETAINED EARNINGS - PRIOR 64,209.93
RETAINED EARNINGS-CURRENT YEAR (924,963.85)
------------
TOTAL EQUITY 343,446.08
----------
TOTAL LIABILITIES AND EQUITY $2,874,780.62
=============
See accompanying notes to Financial Statements and
Independent Auditors Report
3
F-32
<PAGE>
EDUMEDIA, INC.
INCOME STATEMENT
FOR THE 12 PERIODS ENDED DECEMBER 31, 1999
------YEAR TO DATE ------
ACTUAL PERCENT
REVENUE $2,967670.42 100.0%
------------ ------
TOTAL REVENUE $2,967670.42 100.0%
------------ ------
GROSS PROFIT $2,967670.42 100.0%
OPERATING EXPENSES
PURCHASES $2,510,836.64 84.6%
SUBCONTRACTORS 254,991.73 8.6%
SALARIES 340,167.00 11.5%
COMMISSIONS 4,762.20 .2%
PAYROLL TAX EXPENSE 50,824.22 1.7%
OFFICE SUPPLIES & STAT'Y 6,817.84 .2%
POSTAGE & SHIPPING 18,902.10 .6%
PRINTING 4,655.92 .2%
RENT 25,668.00 .9%
REPAIRS & MAINTENANCE 1,285.80 .0%
TELEPHONE 21,890.81 .7%
UTILITIES 7,369.53 .2%
INSURANCE 10,056.78 .3%
PROFESSIONAL DUES & ASSN'S 1,546.70 .1%
ADVERTISING 26,351.05 .9%
INTEREST EXPENSE 386,035.98 13.0%
DEPRECIATION 13,073.00 .4%
AMORTIZATION 8,574.00 .3%
AUTO & TRAVEL 7,047.33 .2%
PROFESSIONAL FEES 70,838.58 2.4%
CONSULTING FEES 74,421.19 2.5%
TRAVEL & LODGING 3,713.33 .1%
OFFICE EQUIPMENT RENTAL/LEASE 10,240.56 .3%
NJ CBT TAX 200.00 .0%
FACTOR FEES 32,363.98 1.1%
--------- ----
TOTAL OPERATING EXPENSES 3,892,634.27 131.2%
------------ ------
NET INCOME FROM OPERATIONS (924,963.85) (31.2)%
------------ -------
EARNINGS BEFORE INCOME TAX (924,963.85) (31.2)%
------------ -------
NET INCOME (LOSS) $ (924,963.85) (31.2)%
=======================================
See accompanying notes to Financial Statements and
Independent Auditors' Report
4
F-33
<PAGE>
EDUMEDIA INC.
STATEMENT OF RETAINED EARNINGS (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1999
RETAINED EARNINGS, BEGINNING OF YEAR $64,209.93
NET INCOME (LOSS) $(924963.85)
------------
RETAINED EARNINGS, (DECIFIT) , END OF YEAR $(860,753.92)
=============
See accompanying notes to Financial Statements and
Independent Auditors' Report
5
F-34
<PAGE>
EDUMEDIA, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
CASH FLOWS PROVIDED FROM OPERATING ACTIVITIES
<S> <C>
CASH RECEIVED FROM CUSTOMERS $ 2,723,043.33
CASH PAID TO VENDORS, EMPLOYEES &
OTHER OPERATING EXPENSES (2,931,477.18)
TAXES PAID (51,024.22)
INTEREST EXPENSE (386,035.98)
----------------
NET CASH (USED) BY OPERATING ACTIVITIES (645,494.05)
----------------
CASH FLOWS FROM INVESTING ACTIVITIES
FIXED ASSET ACQUISITIONS - EQUIPMENT (49,654.30)
INTANGIBLE ASSET COSTS - GOODWILL/COVENANT NOT TO COMPETE (35,000.00)
INTANGIBLE ASSET COSTS - DEF. FINANCING (8,137.72)
SHAREHOLDER LOANS (613,575.15)
----------------
NET CASH (USED) BY INVESTING ACTIVITIES (706,367.17)
----------------
CASH FLOWS FROM FINANCING ACTIVITIES
PROCEEDS FROM ISSUANCE OF COMMON STOCK 1,192,200.00
SBA LOAN PROCEEDS 120,102.22
PRINCIPAL PAYMENTS ON SBA LOAN PAYABLE (13,359.74)
BUSINESS ACQUISITION - GB CONSULTING NOTE PAYABLE 35,000.00
----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,333,942.18
----------------
NET DECREASE IN CASH & CASH EQUIVALENTS ($ 17,918.74)
CASH & CASH EQUIVALENTS, BEGINNING OF THE YEAR 23,517.08
----------------
CASH & CASH EQUIVALENTS, END OF THE YEAR $ 5,599.08
=============---
</TABLE>
See accompanying notes to Financial Statements and
Independent Auditors' Report
6
F-35
<PAGE>
EDUMEDIA, INC.
STATEMETNT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31,1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) ($ 924,963.85)
Adjustments to reconcile net to net cash
Provided by operating activities:
Depreciation and Amortization 21,647.00
(Increase) decrease in:
Accounts Receivable - Trade (244,627.09)
Inventory - Hardware/Software 32,741.82
Inventory - Work-In-Process (803,344.07)
Prepaid Expenses 21,976.85
Rental Security Deposit Rec (2,298.85)
Increase (decrease) in:
Accounts Payable - Trade 559,137.46
Accrued Expenses 61,524.74
Payroll Taxes Payable 127,485.59
NJ Sales Taxes Payable 15,841.95
Notes Payable - Other 86,500.00
Loan Payable - SBA 5,222.02
Deferred Revenue 554,546.00
Pledged Accounts Receivable Contingent Liab (243,591.84)
Other Liabilities 86,708.12
--------------
Total Adjustments 279,469.80
Net cash (Used) by Operating Activities ($ 645,494.05)
==============
See accompanying notes to Financial Statements and
Independent Auditors' Report
7
F-36
<PAGE>
EDUMEDIA, INC.
Notes to Financial Statements
NOTE 1 - Significant Accounting Policies
Description of Business: Edumedia, Inc. designs, develops, markets, services,
and trains by providing software solutions with emerging computer
technology. Primarily focusing on implementing the state of art computer
knowledge in the school system.
Cash and Equivalents: For the purpose of the statements of cash flows, cash
equivalents include time deposits, certificates of deposit, and all highly
liquid debt instruments with original maturities of three months or less.
Inventories: Inventories are valued at the lower of cost (determined on a
last-in, first-out basis), or market.
Bad Debts: The Company has adopted the direct write-off of bad debts method.
Property and Equipment: Equipment, furniture, and improvements are stated at
cost. Depreciation and amortization are provided over the estimated useful
lives of the assets by the straight-line method. Property and equipment are
estimated to have 5-7 year lives. Repairs and maintenance expenditures,
which do not extend the useful lives of the related assets, are expensed as
incurred.
Goodwill: Goodwill and covenant not to compete represents the excess of purchase
price of companies acquired over the fair market value of their net assets
at the date of acquisition and is being amortized on the straight line
method over 5 years.
Income Taxes and Retained Earnings: The company has elected to file as an "S"
Corporation for federal and State income taxes purposes, thus income is
taxed to the shareholders personally. Accordingly, no provision for such
taxes has been made in the accompanying financial statements.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Although these estimates are based on
management's knowledge of current events and actions, it may undertake in
the future, they may ultimately differ from actual results.
See accountants' report on financial statements
8
F-37
<PAGE>
EDUMEDIA, INC.
Notes to Financial Statements
NOTE 2 - CONCENTRATIONS OF BUSINESS AND CREDIT RISK
The Company maintains cash balances, which may exceed federal insured limits.
They historically have not experienced any credit related losses. The
Company provides credit in the normal course of business to customers
located primarily in the northeastern portion of the U.S. The Company
performs ongoing credit evaluations of its customers and maintains
allowances for doubtful accounts based on factors surrounding the credit
risk of specific customers, historical trends, and other information.
<TABLE>
<CAPTION>
NOTE 3 - INVENTORIES
<S> <C>
Hardware/Software $220,786.54
Work in Process 803,304.07
----------
Total $1,024,130.61
=============
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment at cost, less accumulated depreciation and amortization,
consist of the following:
Equipment $ 84,016.53
Office furniture & Fixtures 520.00
Computer Software 2,068.00
--------
Subtotal $ 86,604.53
Less Accumulated Depreciation and
Amortization - 39,637.51
---------
Net Book Value $ 46,967.02
===========
Depreciation Expense charged to Operations was $ 13,073.00.
Amortization Expense for the year 1999 was $ 8,574.00.
</TABLE>
See Accountants' report on financial statements
9
F-38
<PAGE>
EDUMEDIA, INC.
Notes to Financial Statements
NOTE 5 - DEBT
The note payable represents two (2) secured demand notes from SBA with an
interest at 10.50% for $75,000.00 and $100,000.00 maturing in ten years in
the year 2007, and 2009 respectively. The note is secured by a second
mortgage on land and buildings of the principal residence of the
shareholder and also by the first security interest filing substantially by
all of its corporate assets. Also additionally a bride loan for $208,616.34
from a private lender at 20% is due when financing is secured by the
Company. The matures of long-term debt outstanding for the next five years
are as follows:
<TABLE>
<CAPTION>
<S> <C>
Year Ending December 31,
2001 $11,645.06
2002 12,940.21
2003 14.379.62
2004 15,979.11
2005 17,756.58
Less Current Portion 9,142.52
Thereafter 93,113.44
---------
Total debt $ 165,814.02
============
Interest expense for the year ended December 31, 1999 was $ 386,035.98
NOTE 6 - OPERATING LEASE COMMITMENTS
Following is a summary of rental expenses under all operating leases:
Office Rent $ 25,668.00
Equipment Lease 10,240.56
---------
$ 35,908.56
===========
</TABLE>
See Accountants' report on financial statements
10
F-39
<PAGE>
EDUMEDIA, INC.
Notes to Financial Statements
NOTE 7 - INTANGIBLE ASSETS
Intangible assets consist of deferred financing costs, good will and covenant
not to compete. Deferred financing costs are being amortized over the life
of the loan (10) years.
NOTE 8 - TRADE-ACCOUNTS RECEIVABLE
Trade accounts receivable consist of the following:
Current receivables $ 918,556.95
============
NOTE 9 - OPERATING LEASE COMMITMENTS
The Company leases certain office spaces and equipment under operating leases.
The following is a schedule of future minimum rental payments (exclusive of
common area charges) required under operating leases that have initial or
remaining non-cancelable lease terms in excess of one year as of December
31, 1999.
Year Ending December 31,
2000 $5,470.44
2001 5,470.44
2002 5,470.44
2003 3,646.96
Thereafter .00
-----------
Total Minimum Payment Required $ 20,058.28
===========
NOTE 10 - FACTORED COMMITMENTS AND CONTINGENCIES
The Company is contingently liable on a trade receivable, which was
sold/factored with recourse in 1999. The trade receivable, which is currently,
not in default, is due with an unpaid balance of $242,676.69 at December 31,
1999.
See Accountants' report on financial statements
11
F-40
<PAGE>
EDUMEDIA, INC.
Notes to Financial Statements
The Company is currently party to various legal proceedings. While management,
including counsel, currently believes that the ultimate outcome of these
proceedings, individually and in the aggregate, will not have any adverse effect
on the Company's financial position or overall trends in results of the
litigation is subject to inherent uncertainties.
NOTE 11 - RELATED PARTY TRANSACTIONS
Stockholder loans receivable consists of loan by the Company of the officer of
the Company. These amounts are due upon demand and carry no state interest.
NOTE 12 - ADDITIONAL STOCK
During the year, the Company amended its articles of incorporation to issue
additional shares of common stock of no par value from one thousand to ten
million shares. The additional shares of common stock were in turn issued to
investors of the Company during the year at various periods.
NOTE 13 - ACQUISTIONS
The Company acquired 100% of the outstanding share capital of G B Consulting in
a cash transaction. The purchase price was comprised of cash consideration of
$35,000.00 in respect of common shares except for the accounts receivable.
Equipment-net book value $ 26,582.00
===========
Going Concern
As shown in the accompanying financial statements, the Company incurred a net
loss of $924,963.85 during the year ended December 31, 1999, and as of that
date, the Company's current liabilities exceeded its current assets by
$533,782.03. Those factors, as well as the uncertain conditions that the Company
faces regarding its loan agreements (as discussed in Note 6) create an
uncertainty about the Company's ability to continue as a going concern.
Management of the Company is developing a plan to raise capital through an
issuance of additional stock offering to investors. The ability of the Company
to continue as a going concern is dependent on acceptance of the plan by the
Company's creditors and the plan's success. The financial statements do not
include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
See Accountants' report on financial statements
12
F-41
<PAGE>
EDUMEDIA,INC
CONSOLIDATED FINANCIAL STATEMENTS
For the period ended September 30, 2000
i
F-42
<PAGE>
EDUMEDIA, INC
TABLE OF CONTENTS
For the period ended September 30, 2000
Page Number
-----------
ACCOUNTANT'S REPORT ........................................................1
FINANCIAL STATEMENTS
Consolidated Balance Sheets..............................................2-3
Consolidated Statements of Income........................................4
Consolidated Statements of Retained Earnings.............................5
Consolidated Statements of Cash Flows....................................6-7
Notes to the Consolidated Financial Statements...........................8-10
ii
F-43
<PAGE>
DEMBA & ASSOCIATES
CERTIFIED PUBLIC ACCOUNTANT
742 US HWY 206 S0. 912-3 RENATE DRIVE
BELLE MEAD, NJ 08502 HILLSBOROUGH, NJ 08844
TEL. (908) 359-0900 TEL. (908) 359-0222
FAX (908) 359-8511 FAX (908) 3S9-8573
To the Board of Directors and Shareholders of
Edumedia, Inc.
Marmora, NJ
We have reviewed the accompanying balance sheet of Edumedia, Inc, as of
September 30, 2000, and the related statements of income, changes in
stockholders' equity. and cash flows for the nine-month period then ended, in
accordance with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants. All
information included in these financial statements is the representation of the
management of Edumedia. Inc.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on my review, we are not aware of any material modification that should be
made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
Our review was made for the purpose of expressing limited assurance that there
are no material modifications that should be made to the financial statements in
order for them to be in conformity with generally accepted accounting
principles.
December 16, 2000
By: /s/ Damba & Associates
--------------------------
Damba & Associates
1
F-44
<PAGE>
EDUMEDIA INC.
BALANCE SHEET
SEPTEMBER 30, 2000
ASSETS
CURRENT ASSETS
CASH, GENERAL OPERATING A/C $ 300.70
CASH, CORP. OPERATING A/C 55,338.10
ACCOUNTS RECEIVABLE - TRADE 983,980.48
PREPAID EXPENSES 9,460.15
INVENTORY - HARDWARE/SOFTWARE 198,836.59
INVENTORY - WORK IN PROCESS 174,573.45
RENTAL SECURITY DEPOSITS REC 2,298.85
--------------
TOTAL CURRENT ASSETS 1,424,788.32
FIXED ASSETS .
MACHINERY & EQUIPMENT 86,604.53
A/D - MACHINERY & EQUIPMENT (49,441.51)
--------------
TOTAL FIXED ASSETS 37,163.02
OTHER ASSETS
DEF. FINANCING COSTS 12,617.72
A/A - DEF. FINANCING COSTS (8,453.00)
GOODWILL 20,000.00
COVENANT NOT TO COMPETE 15,000.00
A/A - GOODWILL/COVENANT (12,250.00)
SHAREHOLDER LOANS REC 256,438.00
--------------
TOTAL OTHER ASSETS 283,352.72
--------------
TOTAL ASSETS
$ 1,745,304.06
==============
The accompanying Notes to the Financial Statements are
an integral part of this financial statement
2
F-45
<PAGE>
EDUMEDIA INC.
BALANCE SHEET
SEPTEMBER 30, 2000
LIABILITIES AND EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLEo TRADE $ 454,959.99
ACCRUED EXPENSES 1,21,677.57
BANK OVERDRAFT 68,926.70
ACCRUED INTEREST PAYABLE 82,365.84
NOTES PAYABLE - OTHER 86,500.00
PAYROLL TAXES PAYABLE 179,416.54
NOTES PAYABLE - BRIDGE LOAN 208,616.34
CURRENT PORTION - LOAN PAY SBA 9,142.52
NJ SALES TAX PAYABLE 17,245.98
PLEDGED RECEIVABLES CONTG LIAB 39,262.44
--------------
TOTAL CURRENT LIABILITIES 1,268,113.92
LONG-TERM LIABILITIES
LOAN PAYABLE - SBA 157,845.45
--------------
TOTAL LONG-TERM LIABILITIES 157,845.45
-------------
TOTAL LIABILITIES 1,425,959.37
EQUITY
CAP STK 20 MIL AUTH 7303938 OS 1,195,200.00
ADDITIONAL PAID IN CAPITAL 9,000.00
RETAINED EARNINGS - PRIOR (860,753.92)
RETAINED EARNINGS-CURRENT YEAR 574,254.61
TREAS STK 2973160 SH HLD BY CO (598,356.00)
--------------
TOTAL EQUITY 319,344.69
-------------
TOTAL LIABILITIES AND EQUITY
$1,745,304.06
=============
The accompanying Notes to the Financial Statements are
an integral part of this financial statement
3
F-46
<PAGE>
EDUMEDIA INC.
INCOME STATEMENT
FOR THE 9 PERIODS ENDED SEPTEMBER 30, 2000
+---- YEAR TO DATE ---+
ACTUAL PERCENT
REVENUE
REVENUE $ 1,234,749.62 100.0%
--------------- -----
TOTAL REVENUE 1,234,749.62 100.0
--------------- -----
GROSS PROFIT 1,234,749.62 100.0
OPERATING EXPENSES
PURCHASES 325,261.46 26.3
SUBCONTRACTORS 6,576.84 .5
SALARIES 135,420.25 11.0,
COMMISSIONS 75,067.71 6.1
PAYROLL TAX EXPENSE 15,324.61 1.2
OFFICE SUPPLIES & STAT'Y 8,363.59 .7
POSTAGE & SHIPPING 3,716.10 .3
RENT 16,689.96 1.4
TELEPHONE 13,853.98 1.1
UTILITIES 2,755.19 .2
INSURANCE 4,983.00 .4
ADVERTISING 1,672.00 .1
BANK CHARGES 625.42 .1
INTEREST EXPENSE 39,838.50 3.2
DEPRECIATION 9,804.00 .8
AMORTIZATION 11,681.00 .9
AUTO & TRAVEL 6,328.29 .5
PROFESSIONAL FEES 41,406.87 3.4
LICENSE & REGISTRATION FEES 35.00 .0
EMPLOYEE BENEFITS 716.93 .1
MEALS & ENTERTAINMENT 4,471.99 .4
TRAVEL & LODGING 2,231.22 .2
MISCELLANEOUS 282.10 .0
OFFICE EQUIPMENT RENTAL/LEASE 1,076.82 .1
BAD DEBT EXPENSE 5,512.94 .4
GAIN ON EXTINGUISHMENT OF DEBT (73,200.76) (5.9)
--------------- -----
TOTAL OPERATING EXPENSES 660,4951.01 53.5
--------------- -----
NET INCOME FROM OPERATIONS 574,254.61 46.5
--------------- -----
EARNINGS BEFORE INCOME TAX 574,254.61 46.5
--------------- -----
NET INCOME $ 574,254 61 46.5%
=============== =====
The accompanying Notes to the Financial Statements are
an integral part of this financial statement
4
F-47
<PAGE>
EDUMEDIA, INC.
STATEMENT OF RETAINED EARNINGS
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2000
Retained Earnings (deficit), Beginning of Year ($ 860,753.92)
Net Income
574,254.61
---------------
Retained Earnings (deficit), End of Period ($ 296,499.31)
===============
The accompanying Notes to the Financial Statements are
an integral part of this financial statement
5
F-48
<PAGE>
EDUMEDIA, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
CASH FLOWS PROVIDED FROM OPERATING ACTIVITIES
<S> <C>
Cash Received from Customers $ 1,169,326.09
Cash Paid to Vendors, Employees & Other Operating Expenses (1,004,993.08)
Taxes Paid (15,324.61)
Interest Expense (39,838.50)
----------------
Net Cash Provided by Operating Activities 109,169.90
----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Shareholder Loans 582,194.39
Treasury Stock acquired (#2,973,160) shares held
by Company (598,356.00)
----------------
Net Cash (Used) by Investing activities (16,161.61)
----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments on SBA Loan Payable (7,968.57)
Note Payable - GB Consulting Acq (35,000.00)
----------------
Net Cash (Used) by Financing Activities (42,968.57)
----------------
Net Increase in Cash & Cash Equivalents 50,039.72
Cash & Cash Equivalents, Beginning of Year 5,599.08
----------------
Cash & Cash Equivalents, End of Year $ 55,638.80
================
</TABLE>
The accompanying Notes to the Financial Statements are
an integral part of this financial statement
6
F-49
<PAGE>
EDUMEDIA, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C>
Net Income $ 574,254.61
Adjustments to reconcile net cash provided by
operating activities:
Depreciation and Amortization 21,485.00
(Increase) decrease in:
Accounts Receivable - Trade (65,423.53)
Inventory - Hardware / Software 21,949.95
Inventory - Work-In-Process 628,770.62
Prepaid Expenses (9,460.15)
(Increase) decrease in:
Accounts Payable - Trade (449,412.08)
Accrued Expenses 50,152.83
Payroll Taxes Payable 31,405.50
NJ Sales Taxes Payable (1,177.02)
Accrued Interest Payable 36,797.38
Deferred Revenue (554,546.00)
Pledged Accounts Receivable Contingent Liab (203,414.25)
Other Liabilities 27,787.04
--------------
Total Adjustments (465,084.71)
--------------
Net Cash Provided by Operating Activities $ 109,169.90
==============
</TABLE>
The accompanying Notes to the Financial Statements are
an integral part of this financial statement
7
F-50
<PAGE>
EDUMEDIA, INC.
Notes to the Consolidated Financial Statements
For the period ended September 30, 2000
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Description of Business: Edumedia, Inc. designs, develops, markets, services,
and trains by providing software solutions with emerging computer technology.
Primarily focussing on implementing the state of art computer knowledge in the
school system.
Cash and Equivalents: For the purpose of the statements of cash flows, cash
equivalents include time deposits, certificates of deposit and all highly liquid
debt instruments with original maturities of three months or less.
Inventories: Inventories are valued at the lower of cost (determined on a
last-in, first-out basis) or market.
Bad debts: The Company has adopted the direct write-off of bad debts method.
Property and Equipment: Equipment, furniture, and improvements are stated at
cost. Depreciation and amortization are provided over the estimated useful lives
of the assets by straight-line method. Property and equipment are estimated to
have 5-7 year lives. Repairs and maintenance expenditures which do not extend
the useful lives of the related assets are expensed as incurred
Goodwill: Goodwill and covenant not to compete represent the excel of purchase
price of companies acquired over the fair market value of their net assets at
the date of acquisition and is being amortized on the straight line method over
5 years.
Income Taxes and Retained Earnings: The Company has elected to file as an "S"
Corporation for Federal and State income taxes purposes, thus income is taxes to
the shareholders personally. Accordingly, no provision for such has been made in
the accompanying financial statements.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles require management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Although these estimates are based on management's knowledge
of current events and actions it may undertake in the future, they ultimately
differ from actual results.
See accountant's report on the financial statements.
8
F-51
<PAGE>
EDUMEDIA, INC.
Notes to the Consolidated Financial Statements
For the period ended September 30, 2000
NOTE 2 - CONCENTRATIONS OF BUSINESS AND CREDIT RISK
The Company maintains cash balances which may exceed federally insured limits.
They historically have not experienced any credit related losses. The Company
provides credit in the normal course of business to customers located primarily
in the northeastern portion of the U.S. The Company performs ongoing credit
evaluations of its customers and maintains allowances for doubtful accounts
based on factors surrounding the credit risk of specific customers, historical
trends, and other information.
NOTE 3 - INVENTORIES
Hardware / Software $ 198,836.59
Work in process 174,573.45
------------
Total $ 373,410.04
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment at cost, less accumulated depreciation and amortization,
consists of the following:
Equipment $ 84,016.53
Office furniture 520.00
Computer software 2,068.00
------------
Subtotal $ 86,604.53
Less accumulated depreciation and amortization 49441.51
------------
Net Book Value $ 37,163.02
============
Depreciation expense charged to operations was $9,804.00
Amortization expense for the nine months ended was $11,681.00
See accountant's report on the financial statements.
9
F-52
<PAGE>
EDUMEDIA, INC.
Notes to the Consolidated Financial Statements
For the period ended September 30, 2000
NOTE 5 - DEBT
The note payable represents two secured demand note from SBA with an interest at
10.50% for $75,000 and $100,000 maturing in ten years in the year 2007 and 2009
respectively. The note is secured by a second mortgage on land and buildings on
the principal residence of the shareholder and also by a first security interest
filing substantially by all its corporate assets. Also additionally a bridge
loans for $208,616.34 from private lenders at 20% are due when financing is
secured by the Company.
Interest expense for the period ended June 30, 2000 was $39,838.50
NOTE 6 - INTANGIBLE ASSETS
Intangible assets consist of deferred financing costs, goodwill and covenant not
to compete. Deferred financing costs are being amortized over the life of the
loan (10) years.
NOTE 7 - TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable consist of the following:
Current receivable $ 983,980.48
==============
NOTE 8 - FACTORED COMMITMENTS AND CONTINGENCIES
The Company is continently liable on a trade receivable, which was sold /
factored with recourse in 2000. The trade receivable, which is currently is
default, is due with an unpaid balance of $99,990 at September 30, 2000. An
agreement with the factor for payments has been reached commencing from July 1,
2000 of $3,333 for thirty equal consecutive monthly installments of principal
and interest at 27% is due on December 1, 2002
The Company is current party to various legal proceedings. While management,
including counsel, currently believes that the ultimate outcome of these
proceedings, individually and in the aggregate, will not have any adverse effect
on the Company's financial position or overall trends in results of the
litigation is subject to inherent uncertainties.
See accountant's report on the financial statements.
10
F-53
<PAGE>
EDUMEDIA, INC.
Notes to the Consolidated Financial Statements
For the period ended September 30, 2000
NOTE 9 - STOCKHOLDERS' DEBT
During the year, the shareholders approved an increase in authorized common
stock from 10 million shares to 20 million shares.
NOTE 10 - RELATED PARTY TRANSACTIONS
Stockholder loans receivable consists of a loan by the Company to the officer of
the Company. These amounts are due upon demand and carry no state interest.
See accountant's report on the financial statements.
11
F-54
<PAGE>
PART III
Item 1. Index to and Description of Exhibits.
Exhibit Exhibit
Number Name
------ ----
2.1 Certificate and Agreement of Merger
3.(i) Articles of Incorporation
3.(ii) Bylaws of the Registrant.
5 Legal Review Summary of the Registrant.
10 Asset Purchase Agreement
99.1 Certificate of Incorporation
99.2 Certificate of Issuer
99.3 SEC Form D filed by the Registrant.
99.4 New York Form M-11 filed by the Registrant.
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
EDUMEDIA SOFTWARE SOLUTIONS CORP.
---------------------------------
(Registrant)
Date: December 22, 2000
----- -----------------
By: /s/ John P.Daglis
---------------------
John P. Daglis
President, CEO
